The Supreme Administrative Court rendered the 109-Pan-24 Decision of January 20, 2020 (hereinafter, the “Decision”), holding that if a competent authority renders an administrative disposition that demands rectification within a stated period, the contents of the disposition should be clear enough so that the enterprise concerned knows how to rectify, and that only such disposition can serve as the basis for continuous penalties for the enterprise’s failure to rectify.
To summarize the backgrounds and facts of this Decision, Appellee Company A was a channel agent that served as an exclusive agent for the channel licensing business of television stations and movie channels, while Intervenor Company B was a cable television system operator. When Company B and Company A negotiated the channel licensing agreement for 2016, Company A’s position was to maintain the trading term of the Minimum Guarantee (hereinafter, “MG”) from 2014, and use 15% of the total administrative area subscribers announced by the Ministry of the Interior for the operation area as the pricing basis for the agreement. However, for system operators which had been launched before 2015, their pricing was not based on the above method. The Appellant, the Fair Trade Commission of the Executive Yuan (hereinafter, the “FTC”), held that since Company A granted different trading terms to system operators such as Company B and its competitors, this constituted discriminatory treatments without justification and could potentially constrain competition, in violation of Article 20, Subparagraph 2 of the Fair Trade Law. Therefore, a fine was imposed along with the demand that Company A shall rectify within a stated period (hereinafter, the “Previous Disposition”). After receiving the Previous Disposition, Company A negotiated with the system operators at issue such as Company B and proposed an alternative arrangement where the licensing term became 10% of the total administrative subscribers (hereinafter, “MG10”). According to the FTC, the rectification arrangement was still somewhat different from Company A’s trading terms with existing operators and was still a discriminatory treatment without justification. Therefore, since FTC held that Company A had failed to correct its legal violation pursuant to the gist of the Previous Disposition, a fine was imposed again in accordance with the last part of Article 40, Paragraph 1 of the Fair Trade Law along with a demand that Company A shall rectify and report its rectification action (hereinafter, the “Original Disposition”). Dissatisfied, Company A brought an administrative action with the administrative court. After the Taipei High Administrative Court rendered a first instance decision to set aside the Original Disposition, the FTC was dissatisfied and filed this appeal.
According to the Decision, an enterprise shall not engage in any act that constrains competition under Article 20, Subparagraph 2 of the Fair Trade Law, including discriminatory treatments to other enterprises without justification. In case an enterprise provides discriminatory treatment to other enterprises without justification in violation of the above provision to the extent that competition is likely to be constrained, if the enterprise fails to rectify within the stated period notified by the competent authority, the competent authority may continue to require rectification within a stated period and impose a fine in accordance with Article 40, Paragraph 1 of the same law. However, a penalty which is in essence an administrative penalty is preconditioned by a breach of administrative law obligation. To meet the clarity requirement for a penalty, for an enterprise which has been found to provide a discriminatory treatment and has been demanded to rectify within a stated period, the regulatory contents of the disposition demanding rectification within a stated period should be clear so that the enterprise knows immediately the prohibited discriminatory treatment and ways to fulfill the obligation of rectifying the discriminatory treatment. To wit, such disposition can serve as the basis for continuous penalties only when the punishability for action or inaction is foreseeable.
As previously stated, it was held in this Decision that the basis of the Original Disposition was Company A’s failure to fulfill the rectification obligation pursuant to the Previous Disposition. Therefore, another disposition was rendered to impose a fine and continuously demand rectification in accordance with the last part of Article 40, Paragraph 1 of the Fair Trade Law. Therefore, the breach of the rectification obligation required under the Previous Disposition was the constituting criterion for the penalty under the Original Disposition. However, Company A negotiated with the system operators at issue after receiving the Previous Disposition and even proposed MG10 as the trading term for the pricing of the licensing fee as the rectification arrangement. As for whether Company A’s rectification did not violate Article 20, Subparagraph 2 of the Fair Trade Law, since the Previous Disposition failed to specifically indicate if the MG threshold was illegal or how it was illegal, the specifics about the rectification obligation imposed on Company A were not very clear, and Company A could not foresee if its act following the rectification was still punishable. Therefore, it can hardly be concluded that Company A should be penalized for its breach of the rectification obligation under the Previous Disposition. Therefore, the first instance decision, which set aside the Original Disposition on such basis, was not erroneous in its finding of facts and application of law.