July 2023
Oli Wong and Sally Yang
In order to coordinate with new business models alongside meeting practical operation needs, the Taiwan Fair Trade Commission (the “TFTC”) preannounces a draft amendment to the Fair Trade Act on June 6th, 2023 and solicits public opinions until August 5th, 2023 (the “Draft Amendment”).
Highlights of the Draft Amendment:
1. Revision of the threshold for enterprise merger filings:
Current law defines enterprise mergers by its market share and sales amount as threshold for merger declarations. Now with reference to foreign legal systems, the threshold for merger declarations will only be defined by sales amount. Those that meet the following criteria: “Sales for the preceding fiscal year of one of the enterprises in the merger exceeds the threshold amount publicly announced by the competent authority” will be required to file for merger. (Article 11 of the Draft Amendment)
2. Expansion on the domain considered concerted action, now including third-party enterprises with non-horizontal relationships in the regulation:
In addition to the original definition of concerted action as: “competing enterprises at the same production and/or marketing level”, additions to the definition now include “competing enterprises at the same production and/or marketing level and between other enterprises.” (Article 14 of the Draft Amendment)
According to TFTC’s explanation on the amendment, if third-party enterprises facilitate and/or enter concerted action by competing enterprises at the same production and/or marketing level regardless of the existence or nonexistence of an upstream-downstream transactional relationship between these enterprises and the horizontal competitors, all enterprises which agree to constrain business activities with the potential impact of affecting the function of market supply and demand, fall within the scope of concerted action. Instances described as follow fall under the criteria of concerted action: a manufacturer requires its downstream distributors to implement price control, and ultimately, both upstream and downstream parties jointly decide on a unified resale price without engaging in competition; or when a third party provides an algorithm or data that propels horizontal competition to participate in joint pricing.
3. Deletions of regulations on improper offerings of gifts or prizes:
Considering that offering promotional gifts or prizes as part of business promotions is beneficial to novice industry entrants and new products entering the market, in order to loosen market control, the current regulation restricting the provision of gifts and prizes should be eliminated. (Article 23 deletion)
4. Revisions on TFTC administrative investigation requirements:
The Draft Amendment stipulates that the TFTC shall notify parties and related third party to submit evidence such as “communication records” and “communications user’s information”. The wording regarding “dispatch of personnel to related locations” in the original article shall be modified to allow personnel to “enter” the related place. In additional, the Draft Amendment includes a provision for the TFTC to take necessary “measures” in conducting such investigations. (Article 27 of the Draft Amendment)
5. Additional requirements on collecting industry information:
The Draft Amendment stipulates that the competent authority may request enterprises to submit related information or explanations when conducting investigations on industries. If the investigated enterprise evades, interferes or refuses to cooperate without justification upon receiving further notice, a fine of no less than NT$50,000 and no more than NT$250,000 may be imposed. If the enterprise continues to evade, interfere or refuse to cooperate without justification upon receiving subsequent notices, a fine of no less than NT$100,000 and no more than NT$500,000 may be imposed each time. (Articles 27-1 and 44 of the Draft Amendment)
The remaining revisions include the addition of publishing verdicts in online newsletters, addition of regulations on penalties for illegal mergers and deleting administrative responsibilities for business defamation acts etc. (Articles 33, 39 and 42 of the Draft Amendment)
Noteworthy highlights:
1. The TFTC attempts to expand the scope of administrative investigations in this Draft Amendment, including the requirement for parties to submit communication records and access premises from the parties involved. However, such administrative investigations do not require search warrants, unlike those required in criminal procedure. The question of whether the exercise of administrative authority should follow specific procedures and how to ensure the conformity to principle of proportionality will remains to be observed.
2. The TFTC has conducted industry market structure investigations in practice in the past. This amendment definitively permits the TFTC to conduct administrative investigations into specific industries. However, enterprises are unable to predict the scope of required information and clarifications that the TFTC may require during the investigation, which creates uncertainty. As such, the TFTC may consider establishing principles and implementation methods to standardize procedures for market investigations or other related measures.
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