August 2017
The failure of a customer to sign an agreement on a quarterly basis as it used to the extent that the seller chooses another distributor under such circumstance is a normal and reasonable business consideration and is not an abuse of market position(Taiwna)
Sean Liu
The Supreme Administrative Court rendered the 104-Pan-54 Decision of January 29, 2015 (hereinafter, the "Decision"), holding that the failure of a customer to sign an agreement on a quarterly basis as it used to the extent that the seller chooses another distributor under such circumstance is a normal and reasonable business consideration and is not an abuse of market position.
According to the facts underlying this Decision, the Appellant held that Ho Yi Enterprise Co., Ltd. (hereinafter, the "Informant"), which was an upstream supplier of chemical caustic soda materials, arbitrarily cut off its supply of caustic soda products to the Informant without justified business reasons by leveraging its monopolistic position in the caustic soda market in Taiwan. Holding that this constituted an act that abuses the market position of a monopoly in violation of Article 10, Subparagraph 4 of the Fair Trade Law, the Appellant rendered the original disposition to demand the Appellee desist from such illegal act and imposed a fine of NT$2 million in accordance with the first part of Article 41, Paragraph 1 of the same law. Dissatisfied, the Appellant filed an administrative appeal, which was rejected, and then brought administration action. After the original trial court set aside the decision on administrative appeal and the original disposition, the Appellant was dissatisfied and therefore filed this appeal.
According to the Decision, product purchase and sale are contractual acts that are validated when both parties have reached a consensus on them. If the parties trade with the buyer paying cash for goods first and signing a quarterly agreement as it has habitually done before the seller provides goods. Such agreement and conventional practice concerning the trading of goods between the seller and the customer do not violate the legislative objectives of Article 1 of the Fair Trade Law. Therefore, it does not make sense to unconditionally and forcefully restrict such agreement and practice simply because the seller holds a monopolistic market position.
It was further pointed out in the Decision that if a customer fails to sign a quarterly agreement as it has habitually done to an extent that the seller cannot commit to the sale of goods, it is determined that since the seller's choice of a more appropriate distributor or arrangement for export is a normal and reasonable business consideration, not an abuse of its market position, this does not violate the law. In addition, even if a postal demand letter from the customer to request orders for goods is refused, this can only lead to the finding the seller has indicated its intent to refuse sale due to the customer's failure to make an offer as it used to, and this can hardly be cited as evidence to support that the seller will "cut off" the supply of goods in the future.
Therefore, it was held in the Decision that the Appellee did not conduct an act to cut off future supply because of the Informant's failure to make an offer as it used to. Instead, the Appellee merely expressed its intent to refuse the supply of goods to such offer because the Informant had failed to make an offer as it used to in the past. Since this issue has been clarified, the findings in the original decision were not erroneous. Therefore, the appeal was rejected.
The Supreme Administrative Court rendered the 104-Pan-54 Decision of January 29, 2015 (hereinafter, the "Decision"), holding that the failure of a customer to sign an agreement on a quarterly basis as it used to the extent that the seller chooses another distributor under such circumstance is a normal and reasonable business consideration and is not an abuse of market position.
According to the facts underlying this Decision, the Appellant held that Ho Yi Enterprise Co., Ltd. (hereinafter, the "Informant"), which was an upstream supplier of chemical caustic soda materials, arbitrarily cut off its supply of caustic soda products to the Informant without justified business reasons by leveraging its monopolistic position in the caustic soda market in Taiwan. Holding that this constituted an act that abuses the market position of a monopoly in violation of Article 10, Subparagraph 4 of the Fair Trade Law, the Appellant rendered the original disposition to demand the Appellee desist from such illegal act and imposed a fine of NT$2 million in accordance with the first part of Article 41, Paragraph 1 of the same law. Dissatisfied, the Appellant filed an administrative appeal, which was rejected, and then brought administration action. After the original trial court set aside the decision on administrative appeal and the original disposition, the Appellant was dissatisfied and therefore filed this appeal.
According to the Decision, product purchase and sale are contractual acts that are validated when both parties have reached a consensus on them. If the parties trade with the buyer paying cash for goods first and signing a quarterly agreement as it has habitually done before the seller provides goods. Such agreement and conventional practice concerning the trading of goods between the seller and the customer do not violate the legislative objectives of Article 1 of the Fair Trade Law. Therefore, it does not make sense to unconditionally and forcefully restrict such agreement and practice simply because the seller holds a monopolistic market position.
It was further pointed out in the Decision that if a customer fails to sign a quarterly agreement as it has habitually done to an extent that the seller cannot commit to the sale of goods, it is determined that since the seller's choice of a more appropriate distributor or arrangement for export is a normal and reasonable business consideration, not an abuse of its market position, this does not violate the law. In addition, even if a postal demand letter from the customer to request orders for goods is refused, this can only lead to the finding the seller has indicated its intent to refuse sale due to the customer's failure to make an offer as it used to, and this can hardly be cited as evidence to support that the seller will "cut off" the supply of goods in the future.
Therefore, it was held in the Decision that the Appellee did not conduct an act to cut off future supply because of the Informant's failure to make an offer as it used to. Instead, the Appellee merely expressed its intent to refuse the supply of goods to such offer because the Informant had failed to make an offer as it used to in the past. Since this issue has been clarified, the findings in the original decision were not erroneous. Therefore, the appeal was rejected.
