April 2025
Taiwan's Fair Trade Commission Has Fined a Biotechnology Company for Imposing Resale Price Restrictions
Taiwan's Fair Trade Commission (hereinafter referred to as "TFTC") issued Disposition No. 114011 on February 24, 2025, finding that a biotechnology company (hereinafter referred to as "the Respondent") had imposed resale price restrictions on its trading counterparts for intra-articular injection products, thereby violating Article 19, Paragraph 1 of the Fair Trade Act. In this case, the Respondent used contractual terms to require distributors to discuss market pricing with them and enforced specific prices in hospital negotiations by threatening to refuse supply, effectively depriving downstream distributors of their ability to freely determine prices. As the Respondent failed to prove any legitimate pro-competitive justification for its behavior, the TFTC found it to be in violation of the law, imposed a fine of NT$300,000, and ordered the immediate cessation of the unlawful practice.
The TFTC investigation revealed that on June 30, 2021, the Respondent entered into a product distribution agreement with the complainant, stipulating that the complainant would sell intra-articular injection products to specific hospital systems. On March 25, 2023, the complainant placed an order with the Respondent and simultaneously submitted a price quote to the hospital. However, after receiving the order, the Respondent declined to supply the products on the grounds that the complainant had failed to consult in advance regarding its hospital price quotation. The Respondent cited Article 14, Paragraph 4 of their distribution agreement, which provides that "market pricing or adjustments of this product should be discussed with Party B in advance before implementation," and demanded that the complainant renegotiate with the hospital at a specific price.
The TFTC further investigated and highlighted that the Respondent holds a significant market position and influence in the intra-articular injection market. According to the health insurance payment data for intra-articular injections provided by the National Health Insurance Administration under the Ministry of Health and Welfare, the Respondent's market share is approximately 25%, ranking second among more than 10 domestic companies selling similar products, with a market share gap of over 10% compared to other competitors. Additionally, the top three companies collectively account for more than 70% of the market share, indicating an oligopolistic market structure. The TFTC determined that the Respondent, leveraging this market position, possessed sufficient power to exert substantial influence over downstream distributors, especially in cases where the Respondent was the sole supplier of the product to the complainant. The restriction on resale prices substantially undermined market competition mechanisms and distributors' pricing autonomy, affecting price competition in the market. As the Respondent failed to prove that its conduct met the justifiable reasons stipulated in the proviso of Article 19, Paragraph 1 of the Fair Trade Act, its conduct was deemed an unlawful resale price restriction. Consequently, the TFTC imposed a fine and ordered the immediate cessation of the unlawful conduct.
The TFTC investigation revealed that on June 30, 2021, the Respondent entered into a product distribution agreement with the complainant, stipulating that the complainant would sell intra-articular injection products to specific hospital systems. On March 25, 2023, the complainant placed an order with the Respondent and simultaneously submitted a price quote to the hospital. However, after receiving the order, the Respondent declined to supply the products on the grounds that the complainant had failed to consult in advance regarding its hospital price quotation. The Respondent cited Article 14, Paragraph 4 of their distribution agreement, which provides that "market pricing or adjustments of this product should be discussed with Party B in advance before implementation," and demanded that the complainant renegotiate with the hospital at a specific price.
The TFTC further investigated and highlighted that the Respondent holds a significant market position and influence in the intra-articular injection market. According to the health insurance payment data for intra-articular injections provided by the National Health Insurance Administration under the Ministry of Health and Welfare, the Respondent's market share is approximately 25%, ranking second among more than 10 domestic companies selling similar products, with a market share gap of over 10% compared to other competitors. Additionally, the top three companies collectively account for more than 70% of the market share, indicating an oligopolistic market structure. The TFTC determined that the Respondent, leveraging this market position, possessed sufficient power to exert substantial influence over downstream distributors, especially in cases where the Respondent was the sole supplier of the product to the complainant. The restriction on resale prices substantially undermined market competition mechanisms and distributors' pricing autonomy, affecting price competition in the market. As the Respondent failed to prove that its conduct met the justifiable reasons stipulated in the proviso of Article 19, Paragraph 1 of the Fair Trade Act, its conduct was deemed an unlawful resale price restriction. Consequently, the TFTC imposed a fine and ordered the immediate cessation of the unlawful conduct.
