Taiwan - Antitrust & Competition Guide 2016

Legal News & Analysis - Asia Pacific - Taiwan – Competition & Antitrust

21 April, 2016

 

General

 

What is the main piece of legislation of general application which regulates anti-competitive behavior? What are the main prohibitions in the legislation?

 

Fair Trade Law (FTL). The main prohibitions include: restraints of competition (abuse of market power, concerted action, merger control, price fixing and improper vertical restraint); and unfair competition.

 

Which regulator is responsible for administering and enforcing competition laws?

 

Taiwan Fair Trade Commission (TFTC).

 

Are there any exclusions from the competition legislation of general application? Are there any sector-speci c competition laws or regulations?

 

The FTL provides that no provision of this law shall apply to any proper conduct in connection with the exercise of rights pursuant to the provisions of the Copyright Act, Trademark Act, Patent Act or other Intellectual property laws. Other than this, there are no exclusions from the competition legislation of general application.

 

Certain specific industry sectors are regulated by TFTC internal administrative rulings. These include telecommunications, large distributors, financial institutions, text books publishers, the sale activities of offshore resort memberships, motorcycles, pre-sale buildings, cross-ownership and joint provision of 4C (telecommunication, Cable TV, Computer Network and E-Commerce), electronic marketplace, cable television, gas and oil, logistics, real estate brokerage and car aftermarkets.

 

Does the competition legislation apply extraterritorially to persons, behaviour or action outside the jurisdiction?

 

The FTL applies to anti-competitive conduct in Taiwan, and to such conduct outside of Taiwan which has the effect of eliminating or restricting competition in the Taiwanese market.

 

What penalties and liabilities may be imposed for a breach of the competition law?

 

If an enterprise abuses its dominance, engages in concerted actions, imposes restrictions on resale prices of the goods without justi able reasons or engage in acts that is likely to restrain competition, the TFTC can order the enterprise to cease or cure its violation or take other necessary corrective measures within a prescribed period. The Commission may also impose an administrative fine on the enterprise up to NTD 50 million. If the enterprise does not follow such an order, it may be additionally ned up to NTD 100 million. Failure to obey the above order of the TFTC or after the cessation of its anti-competitive conduct the enterprise commits the same or similar violation again, the enterprise may also be punished by imprisonment, or detention and/or a criminal penalty.

 

The TFTC may impose an administrative ne of up to 10% of the total sales revenue of the violating enterprise in the previous scal year, without being subject to the limit of an administrative ne as set forth above, if the TFTC nds that the enterprise to be in serious violation of the prohibitions against the abuse of monopolistic position or cartel conduct. TFTC has published implementing rules which state that a 10% cap will apply to the global turnover of an enterprise in the scal year preceding the year in which the TFTC imposes a fine.

 

If an enterprise violates other provisions of the FTL, the TFTC can order the enterprise to cease or cure its violation or take other necessary corrective measures within a prescribed period. The TFTC may also impose an administrative ne on the enterprise up to NTD 25 million. If the enterprise does not follow such an order, it may be additionally ned up to NTD 50 million.

An enterprise that violates any of the provisions of the FTL so as to infringe upon the rights and interests of another may be liable for damages arising from the infringement.

 

Prohibition on anti-competitive agreements

 

What kinds of agreement or conduct is illegal under the prohibition?

 

The FTL prohibits concerted action. Concerted action is defined as competing enterprises at the same production and/or marketing stage, by means of contract, agreement or any other form of mutual understanding, jointly determining:

 

(a) the price, technology, products, facilities, trading counterparts, or trading territory with respect to goods or services; or

(b) any other behavior that restricts each other’s business activities, resulting in an impact on the market function with respect to production, trade in goods or supply and demand of services. A pure information exchange will not be suf cient to constitute a concerted action.

 

Improper vertical restraints, such as improper tying, territory restriction, exclusive dealing, discrimination, etc. are also prohibited under the FTL. However, these vertical restraints are not per se illegal and are reviewed on a case by case basis by the TFTC by adopting a rule of reason analysis.

 

What types of agreements or conduct are illegal by object? And which are illegal only if they are signi cantly anti-competitive in effect?

 

The FTL considers that price- fixing, concerted action, abuse of market power are “by object” restrictions (i.e. automatically harmful to competition such that so there is no need to demonstrate anti-competitive effects in the relevant market).

 

Is there regulation of vertical agreements and if so, what type of vertical restraints or provisions in such agreements are typically examined?

 

Yes. The TFTC will examine the following vertical restraints: resale price maintenance tying, territory restraints, boycott, discrimination, exclusive dealing, etc.

 

Is resale price maintenance allowed? Are recommended resale prices or maximum resale prices permitted?

 

No. Resale price maintenance is generally not allowed unless there are justi able reasons.

 

Are there any defences or relief from liability provided by the legislation?

 

Yes. Concerted actions that meet certain criteria as prescribed under the FTL and is bene cial to the economy as a whole and in the public interest can be allowed with prior approval from the TFTC. 

 

Is there a leniency regime? If there is, please describe the extent of and process in seeking leniency?

 

Yes. Under the Regulations on Immunity and Reduction of Fines in Illegal Concerted Action Cases, the TFTC will grant:

 

(a) full immunity from cartel nes for the rst whistle-blower that reports the cartel before the agency is aware of it.

(b) reductions in cartel nes for up to four additional leniency applicants coming forward once the agency is aware of the cartel. The rst will have its ne reduced by 30% to 50%; the second by 20% to 30%; the third by 10% to 20% and the fourth by up to 10%.

 

If situation (a) above is not applicable to any enterprises, the enterprise which is the rst to apply the reduction will be granted the full immunity.

 

In each case, the parties must cooperate with the TFTC in order to bene t from immunity/leniency. Companies that initiated a cartel will be ineligible.

 

Abuse of Dominance or Market Power

 

How is “dominance” or “market power” determined? Is there a market share test?

 

An enterprise shall be deemed to be dominant if any of the following circumstances exists:

 

(a)  the market share of the enterprise in the relevant market reaches one half of the market;

(b)  the combined market share of two enterprises in the relevant market reaches two thirds of the market; and

(c)  the combined market share of three enterprises in the relevant market reaches three fourths of the market.

What type of conduct constitutes abuse of dominance or abuse of market power?

 

The following types of conduct by a dominant enterprise will constitute an abuse of dominance:

 

(a) directly or indirectly prevent any other enterprises from competing by unfair means; 

(b) improperly set, maintain or change the price for goods or the remuneration for services;

(c) make a trading counterpart give preferential treatment without justification; or

(d) other abusive conducts by its market power

 

Are there any defences or relief from liability or exclusions applicable for abusive conduct?

 

No. 

 

Merger Control

 

Is there a merger control regime? What is considered a “merger”?

 

Yes. A merger includes a merger, share acquisition of more than one-third of the shares in another company, major asset acquisition, establishment of joint ventures and where an enterprise directly or indirectly controls of the business operation or the appointment or discharge of personnel of another enterprise.

Is the merger noti cation a mandatory or voluntary process?

 

Mandatory.

 

When must the merger be notified to the regulator?

 

A notification must be noti ed to the TFTC and a clearance must be obtained from the TFTC before the closing date of the merger.

 

What are the filing thresholds and are there any exemptions from notification requirements?

 

Transactions need to be authorized by the TFTC before they are completed if they would:

 

(a)  create a market share of one third; or

(b)  one of the enterprises in the merger has a 25% market share; or

(c) one of the enterprises participating in the business combination has revenue in Taiwan for the preceding scal year exceeding NTD 15 billion, and the other enterprise has revenue in Taiwan for the preceding scal year exceeding NTD 2 billion. 

 

Higher thresholds apply for financial institutions (NTD 30 billion and NTD 2 billion).

 

There are a number of exceptions to the requirement to notify a transaction, including certain transactions involving enterprises in a single corporate group, certain share buy backs and the transfer of a business to an enterprise newly-established by itself.

 

Please provide a brief description of the merger clearance process and the typical timeline for merger clearance. 

 

A ling must be lodged with the TFTC in the requisite form. When the TFTC is of the view that the ling materials are complete, it will start the 30 days review period, which can be extended for another 60 days. It usually takes two to two and a half months to obtain clearance from the TFTC.

 

What are the consequences of failing to notify the regulator when required?

 

The consequences are that the TFTC may prohibit such merger, prescribe a period for such enterprise(s) to split, to dispose of all or a part of the shares, to transfer a part of the operations, or to remove certain persons from their positions, or make any other necessary dispositions, and may impose an administrative penalty of no less than NTD 0.2 million and no more than NTD 50 million upon such enterprise(s). Where the ling contains any false or misleading information, the merger could be prohibited; or the parties could be ordered to dispose of shares, to transfer part of the operations, or remove certain persons from positions. The TFTC could also impose a ne of up to NTD 1 million. 

 

 

For further information, please contact:

 

H. Henry Chang, Baker & McKenzie

henry.chang@bakermckenzie.com