In late October/early November, 2014, two important rulings on concerted action were issued by the Taipei High Administrative Court, which struck down, respectively, a fine of NT$6.07 billion imposed collectively on nine independent power plants (“IPPs”) and a fine of NT$25 million imposed on an ODD manufacturer by the Taiwan Fair Trade Commission (“TFTC”).
In the first case, a NT$6.32 billion fine (which was further reduced to NT$6.07 billion by the TFTC) was imposed on the IPPs in March 2013, for their joint refusal to renegotiate the pricing terms of their Power Purchase Agreements (“PPAs”) with the state-owned Taipower Company (“Taipower”). This was the highest fine ever imposed by the TFTC in its history. In October 2014, the Taipei High Administrative Court ruled in favor of the nine IPPs and vacated the TFTC’s decisions.
The main issue was the determination of the scope of the relevant market. The TFTC considered that the relevant product market in this case was the power generating market, and the geographic market was the island of Taiwan. By refusing to renegotiate with Taipower concerning the price rate of power supply after discussions in the IPP Association, the nine IPPs were considered by the TFTC to be involved in a concerted action. However, such a determination was deemed by the Taipei High Administrative Court to be inconsistent with the Electricity Act and the relevant principles for market determination in the Taiwan Fair Trade Act (“TFTA”). Since each IPP was required to supply power at a given price rate and a given quantity as provided in their respective PPAs with Taipower, the demand and supply substitutability in the TFTC’s alleged “power generating market” simply did not exist and therefore these IPPs were not horizontal competitors. Further, since each IPP had its own permitted area for operation as licensed by the central government authority pursuant to the Electricity Act, the TFTC’s determination of geographic market as the island of Taiwan was also erroneous.
As for the second case, the TFTC argued that the ODD manufacturer engaged in bid-rigging and the exchange of competitively-sensitive information in the ODD procurement events held by Dell and HP outside of Taiwan during the period between September 2006 and September 2009, which were capable of affecting the supply and demand function of the local ODD market and thus violated the provision which prohibits concerted actions in the TFTA.
The Court, while upholding the TFTC’s jurisdiction over the alleged concerted action outside Taiwan, determined that the TFTC bore the burden of proof regarding the existence of concerted action. However, although the TFTC proved that the ODD manufacturer engaged in bid-rigging from September 2006 to February 2009, it failed to prove the effect of such bid-rigging on Taiwan’s ODD market. Also, the TFTC failed to prove the ODD manufacturer’s involvement in any bid-rigging after February 2009 because Dell’s ODD procurement event in May/June 2009 was carried out by one-on-one negotiations. Further, the 3-year statute of limitations for the TFTC to impose penalty for such conduct, which started running from the time when the conduct ended (in February 2009), had also expired.
These recent important cases, while being appealed, show that the Taipei High Administrative Court is putting more emphasis on the TFTC’s burden of proof, meaning that the Court will carefully examine whether the supporting evidence submitted by the TFTC is capable of proving each requirement of the alleged concerted actions. More importantly, the 3-year statute of limitations for the TFTC to impose fines, which the Court held begins at the time when the conduct ends rather than when the effect on competition materializes, will most likely be a critical issue in future cartel cases.