On 17 June 2016, the Taiwan Fair Trade Commission (TFTC) published the amendments to the Guidelines on Handling Cases Involving Trade Associations and Other Organizations (the "Guidelines"), which took effect on same date. The amendment this time not only adjusts relevant content according to the Taiwan Fair Trade Act (the "TFTA") promulgated on 4 February 2015, but also based on the TFTC’s previous case precedents, revises the list of activities conducted by trade associations or other organizations that may constitute cartel activities. Other activities that may result in a restrictive impact on competition are also added.
Below are the key features of the amendments to the Guidelines:
- As the definition of "enterprise" in the TFTA has been amended, the associations lawfully established to promote the benefits of its members are also subject to the Guidelines after the amendment. Also, by referring to Article 2 of the Enforcement Rules of the TFTA, the Guidelines specifically stipulate the party/entity applicable to the Guidelines.
- Based on the TFTC’s previous case precedents, the Guidelines revise the list of activities conducted by trade associations or other organizations that may constitute cartel activities and add examples thereof:
- to constrain members from engaging in price competition or regulating their selling prices for commodities or service fees (such as to establish the list of reference prices or the standards for service fees, or to constrain the adjustment range);
- to constrain members’ trading geographic area, trading counterparts or the content of trading (such as to constrain members from competing for trading counterparts, to constrain members’ tender price, decision whether or not to tender or other relevant matters, or to demand the up/downstream counterparties to end the trading activities with non-members);
- to constrain businesses from entering the relevant market (such as to boycott non-members’ sales or supply of service, to reject an enrollment application to be filed by an entity that cannot engage in practice before enrolling in the association according to the applicable laws);
- to constrain the types, specifications or patterns of commodities or services;
- to constrain members’ manufacturing, delivery, sales or supply of commodities or services, or to constrain members from expanding the capacity or scale of production (such as to regulate uniform holidays or rest, to add/reduce holidays or rest, or to constrain the frequency of participating exhibitions);
- to constrain members’ terms and conditions for the sales of commodities or the supply of service or other trading conditions (such as to constrain members from stating a certain price in advertising and promotion);
- other joint activities to constrain the competition between enterprises.
- Based on the TFTC’s previous case precedents, the Guidelines add other activities conducted by trade associations or other organizations that may result in a restrictive impact on competition and thus violate Paragraph 1, 2 or 4, Article 20 of the TFTA:
- to boycott or crowd out a certain enterprise by means of issuing letters, facsimile or enrolling his/her/its name with relevant constraints or punishments, and thereby result in a potentially restrictive impact on competition;
- to give differentiated treatment to other enterprises without reasonable cause and thereby result in a potentially restrictive impact on competition, even if such treatment does not constitute cartel activity, this includes rejecting an enrollment application filed by an entity that cannot engage in practice before enrolling in the association according to the applicable laws;
- to prevent price competition between members by means of threat, solicitation or other improper means, such as to reject the application to enroll, to direct members to adjust the price for commodities or service fees through the disclosure of various cost information, to notify or recommend members to adjust the price for commodities or service fees after calculating on its initiative, to demand a cash pledge to prevent members from price competition, to demand members to guarantee that they will crowd out a certain trading counterpart, or to establish internal regulation to encourage members to participate in cartel activities.
- The Guidelines clarify that on a general aspect some activities conducted by trade associations or other organizations do not violate the TFTA:
- to collect domestic and foreign market survey, statistics, researches and current trend of industries, commerce and service industry and other market intelligence for members' reference.
- to hold functional training programs or lectures on the R&D, business promotion and operations management.
- to adjust agriculture production and marketing upon the request of the competent authorities in charge of agricultural policy, in accordance with agricultural laws and regulations.
- to implement the matters that are delegated by the competent authorities to exercise state power.
- to establish self-disciplinary convention, occupational ethics and other self-disciplinary regulations, in order to encourage members to conform to laws and regulations.
- Article 43 of the TFTA stipulates that if any trade association or other organization is in violation of the TFTA, the TFTC may impose the same penalty on any member of the concerned association which participates in such violation, unless such member can demonstrate that it has no knowledge of such violation, or does not participate in the collusion, does not implement or ends such violation prior to the investigation conducted by the TFTC. The aforesaid principle is also included in the Guidelines.
As trade associations or other organizations are established aiming to harmonize its members' relationship and to pursue members' common interests, how and to what extent its conduct should be regulated by the TFTA always spark discussion in local legal society. Thus, the amendment this time should be able to facilitate the compliance work of trade associations or other organizations and in the meantime serve as insightful guidance for the TFTC while handling relevant cases.