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FTA ARTICLE 24 APPLIES ONLY WHEN TRADE ORDER ARE LIKELY TO BE HARMED
In a recent judgment, the Taipei High Adminis-trative Court stated that for Article 24 of the Fair Trade Act (FTA) to apply, it is not sufficient merely for an enterprise to have engaged in de-ceptive or clearly unfair competitive conduct; its conduct must also have been sufficient to affect the orderly conduct of trade. Although such conduct is not limited to one that has in fact af-fected the orderly conduct of trade, the actions concerned must at least have been sufficient to cause harm to competitors or consumers.
On 18 September 2002, Sanrio Taiwan Co., Ltd., the Taiwanese subsidiary of Sanrio of Japan, filed a complaint alleging that by importing and selling counterfeit products using the "Hello Kitty" design owned by Sanrio, OWK First En-terprise Co. Ltd. (OWK) had violated Articles 20 and 24 of the FTA as in force of the time of the alleged actions. However, OWK asserted that although the goods it had imported were coun-terfeit, the act of importation had merely been a precursor to "affecting the orderly conduct of trade." After being imported the goods had been seized by the police; they had not found their way onto the market, and therefore it had not been possible for them to affect the orderly conduct of trade.
After investigating the case, the Fair Trade Commission (FTC) found that OWK had indeed improperly imitated the appearance and shape of "Hello Kitty" goods, thus exploiting the fruits of another's labor, in a manner sufficient to affect the orderly conduct of trade. The FTC ordered OWK to immediately cease such actions, and imposed a fine of NT$200,000. In particular, the FTC stated that "sufficient to affect the orderly conduct of trade" referred to the inherent nature, or the outcome, of deceptive or obviously unfair conduct having the potential to adversely affect the conduct of trade, and was not limited to conduct that had already led to a substantive adverse effect in the market. Otherwise the FTC, as the agency responsible for enforcing the FTA, would only be able to impose penalties after the event, and would not be able to take preventive action.
OWK contested the FTC's decision by filing a suit in the administrative court. In its 2003 judgment, the Taipei High Administrative Court stated that before an enterprise could be penal-ized for a violation of the FTA in the form of deceptive or clearly unfair competitive conduct, it must first be proved that the enterprise had engaged in competition or commercial transac-tions in a deceptive or clearly unfair manner, and that there had been a likelihood that the orderly conduct of trade would be affected. To invoke Article 24 of the FTA, it was not enough for an enterprise merely to have engaged in deceptive or clearly unfair competitive conduct, but its conduct must also have been sufficient to affect the orderly conduct of trade. Although "conduct sufficient to affect the orderly conduct of trade" was not limited to actions that had already in fact affected the conduct of trade, it was nonetheless a necessary condition that the actions concerned were sufficient to cause harm to competitors or to consumers.
Because the entirety of the goods at issue in the case had been seized, it had not been possible for them to influence orderly competition in the market. Hence it had been premature for the FTC to conclude, on the basis that OWK had imported the goods with the intention of selling them, that OWK's act of importing the goods had been sufficient to affect the orderly conduct of trade. Accordingly, the court revoked the FTC's decision.