Newsletter
DRAFT AMENDMENTS TO FAIR TRADE ACT
The Fair Trade Commission (FTC) has proposed amendments to the Fair Trade Act (FTA) in or-der to reform the review of business combina-tions, the regulation of horizontal concerted ac-tions, and related legal regimes. The main points of the proposed amendments are outlined below:
Review of business combinations: In response to the OECD Secretariat's peer review com-ments on Taiwan's competition policy, the FTC is considering to abolish the use of mar-ket share as a threshold for requiring pre-merger notification filings. Nevertheless, the FTC's current draft retains market-share thresholds in order to solicit public comment. The FTC also proposes new provisions whereby, if an enterprise makes a reinvest-ment to set up a 100%-owned subsidiary, this should not be considered to affect market structure, so that there is no need for notifica-tion.
Changes in regulation of concerted actions, based on foreign competition legislation: (1) new general provisions are proposed for ex-ceptional permissions for concerted actions; (2) new provisions are proposed to empower the FTC to exempt concerted actions from penal-ties, including those that do not substantively affect the functioning of the market; (3) new provisions are proposed to make an agreement that violates a prohibition on concerted actions invalid, and to define the legal consequences of violating conditions attached to an approval for concerted action; and (4) new leniency provisions are proposed that would empower the FTC to reduce or waive administrative penalties for an enterprise participating in concerted actions if the enterprise informs the FTC on its own initiative and cooperates with the FTC's investigation.
Resale price maintenance (RPM): Legislation in other countries either makes contractual agreements fixing resale prices automatically illegal, or applies principles of "reasonable-ness" as the basis for law enforcement. However, the FTC is yet to reach a conclusion as to which approach is preferable. Taking account of Taiwan's state of socioeconomic development and the FTC's practical en-forcement needs, the FTC has put forward two different legislative proposals for discussion, one expressly prohibiting RPM agreements, and the other retaining administrative discre-tion as to whether to intervene or apply sanc-tions in the case of an RPM agreement that is unlikely to restrain competition. Further proposed provisions would make RPM agreements invalid, and apply the provisions on RPM mutatis mutandis to fees charged by enterprises for services.
Changes in line with government restructuring: In line with the government restructuring, the competent authority for the Act will be re-named as the National Fair Trade Commis-sion.
Different penalties for different classes of violation: The FTA includes provisions to control activities that restrain competition, as well as provisions to combat unfair competi-tion. It is differently structured than competi-tion legislation in most other countries, and does not distinguish between different types of violation in order to impose different penalties. Some have argued that this may allow busi-nesses to abuse the FTC's discretionary pow-ers. Accordingly, the proposed amendments provide for different administrative sanctions for different types of violation, taking into account the relevant provisions of the Ad-ministrative Penalty Act and current practice in Taiwan in adjudicating and penalizing ad-ministrative non-compliance.
Amendments in line with operational needs and changes in other legislation: In coordina-tion with proposed amendments to the Trademark Act, which will expand the scope of trademark protection, and to avoid imbal-ance caused by different levels of penalties under the Trademark Act and the FTA for the sale, transportation, importation, or exporta-tion of trademark-infringing goods, provisions for the protection of trademarks are to be re-moved from the FTA. But it is proposed to add new provisions to outlaw activities that dilute or harm the distinctiveness or reputation of another's mark, take unfair advantage of another's commercial reputation, or otherwise exploit the fruits of another’s labors.
Provisions on multilevel pyramid sales to be repealed: For operational reasons, the regula-tion of multilevel sales is to be made the sub-ject of separate legislation in the form of the proposed Multilevel Sales Control Act.
The FTC has placed its current draft of the pro-posed amendments online to solicit comments from the public. After completing this consulta-tion process it will present its final draft to the Executive Yuan for review.