On February 6, Taiwan’s antitrust regime becomes significantly stronger.

Key changes at a glance

  • Doubling of the maximum fine for anti-competitive conduct (up to NTD50 million/approximately US$1.58 million) and a further fine of up to NTD100 million (approximately US$3.17 million) for failing to comply with the order made by the Taiwan Fair Trade Commission (TFTC) to end the infringement.

  • legal presumption that, in certain circumstances,parallel market conduct by competitors is the result of coordination. This would shift the burden of proof to companies who would then need to rebut the presumption by showing that they had not colluded and had in fact acted independently (albeit in parallel). This presumption will be applied from February 6, 2015.  Under the principle of non-retroactivity, if the conduct in question had ended prior to this date, then the presumption will not be applied (even if the TFTC's decision comes after this date). 

  • More severe penalty for the providing false data in merger filings. Under the new rules, if a merger filing contains false information, then 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 fine of up to NTD1 million (approximately US$31,700) on the companies that supplied the information. 

  • Extended ‘Statute of Limitation’: the period during which the antitrust agency must bring an action has been extended from three to five years. This applies to investigations of anticompetitive conduct and unauthorized mergers, as well as to enforcement against the supply of false information in the merger control context.

  • softening of the TFTC's approach to resale price maintenance. Technically, these types of restrictions remain prohibited by the law but  the TFTC will now undertake a “rule of reason” type analysis.  This could well resemble the approach adopted at a federal level in the US where, instead of being automatically illegal, it is possible to argue that such restrictions are legal because they generate certain countervailing benefits for consumers.  It will be interesting to see how this develops in Taiwan.  As in the US, RPM arrangements will need to be considered very carefully in advance.

  • New power to suspend an investigation: the TFTC can suspend an investigation if the investigated company promises to take specific measures to discontinue and remedy the investigated conduct (under supervision and during a period specified by the TFTC). If the investigated company fulfils its promise, the TFTC may even terminate the investigation and close the case.

Despite earlier proposals, the TFTC has not been granted 'dawn raid powers' which would have enabled it to investigate suspected anti-competitive conduct by launching surprise inspections of business premises.

Implications for you: antitrust compliance

Given the greater likelihood of antitrust enforcement by the TFTC  (especially in respect of parallel market conduct) and higher fines, companies should ensure that they have practical and up-to-date antitrust compliance programs in place in Taiwan.

An effective compliance program is one that is tailored to both the company’s commercial activities and the antitrust ‘risk environment’ in which it is active.

The new presumption in relation to coordination between competitors means that companies in highly concentrated, transparent markets may find it is necessary to show that they took decisions independently.  Keeping internal records as to why certain key pricing decisions etc. were taken would therefore be prudent.

The new and drastic sanctions for submitting false information (as part of a merger filing) also underline the need for companies to exercise caution when drafting their notifications, especially where estimates are used. 

Now is a good time for companies to check that employees in Taiwan understand what they can and cannot do from an antitrust perspective - so that the company is both competitive and compliant. Training is the best way to refresh memories and remind staff (and Board members) of the significance of antitrust compliance.

Changes to merger control (from March 6, 2015)

The notification thresholds under Taiwan merger control are unchanged: transactions need to be authorized by the TFTC before they are completed if they would: (i) create a market share of one third; or (ii) one of the enterprises in the merger has a 25% market share; or (iii) sales of one of the enterprises in the merger exceeded a threshold publicly announced by the TFTC (though the thresholds for the various industries have still not been announced).

However, the new law does alter the way in which a company's sales should be calculated for the purpose of assessing whether the financial threshold has been met.  The new methodology is similar to that used in the EU and elsewhere in that it is, in broad terms, necessary to take into account turnover generated by the group of the acquiring entity and by the target company (and companies it controls). Given that these amendments will be effective from March 6, 2015, the TFTC is expected to publish guidelines soon.

The amendments also specify three new situations where there will be no need to file a pre-merger notification: (i) where any of the enterprises participating in the merger (or its 100%-held subsidiary) already holds 50% or more of the voting shares or capital contribution of another enterprise in the merger and merges with such other enterprise; (ii) where one single enterprise invests to set up a subsidiary of which the enterprise holds 100% of the voting shares or capital contribution; or (iii) any other type of merger situation specified in the future by the TFTC.

Conclusion

The new changes represent an overhaul of the law and signal a commitment to greater and stricter antitrust enforcement in Taiwan. We recommend that companies doing business in Taiwan act proactively to understand and manage their antitrust risk, including by checking that their compliance programs are adequately tailored and understood by employees.