The Fair Trade Commission promulgated the Standard for Applying Article 46 of the Fair Trade Law (hereinafter, the “Standard”) via the Gong-Fa-10515605372 Directive of August 4, 2016. Consisting of six articles, the Standard came into effect immediately.
Article 46 of the Fair Trade Law provides: “The Law has precedence over other laws with regards to the governance of any enterpriseÕs conduct in respect of competition, provided that this shall not apply if other laws contain relevant provisions that do not conflict with the legislative purposes of this Law.” Therefore, Article 1 of the Standard specifically stipulates the principles applicable to this article.
Article 2 of the Standard provides that Article 46 of the Fair Trade Law applies only when an enterprise’s competitive conduct is prohibited by the Fair Trade Law but is conducted pursuant to other laws, regulations or directives. Conversely, Article 46 does not apply if an enterprise’s conduct in respect to competition is not prohibited by the Fair Trade Law or is prohibited both by the Fair Trade Law and other laws. However, the Fair Trade Commission may negotiate a solution with other agencies.
Article 3 of the Standard provides that the Fair Trade Law is a basic economic law. If an enterprise’s conduction in respect of competition is prohibited by the law but is conducted pursuant to other laws, regulations or directives, this law should basically have precedence, and other laws, regulations or directives may have precedence only when they do not contradict the legislative purposes of the Fair Trade Law. Article 4 of the Standard specifically provides that the legislative purposes of the Fair Trade Law are to safeguard trading order and consumer interest, ensure free and fair competition an promote economic stability and prosperity.
Article 5 of the Standard provides that to determine if the interpretation and implementation of other laws, regulations or directives contradict the legislatives purposes of the law, the following factors shall be generally considered: (1) the enactment (formulation), amendment and implementation of other laws, regulations or directives; and (2) means of competition, scope of the market for individual cases, number and market performance of competitors, market concentration, market entry barrier, economic efficiency, consumer interest, transaction costs, etc. The Standard also points out certain common practical examples, such as industries of natural monopoly. Since market competition can no longer be harnessed to guide the most efficient allocation of resources for industries of natural monopoly, it can be determined that price control exercised pursuant to other laws does not contradict the legislative purposes of this law.