Abuse of dominance in Taiwan

Abuse of dominance

How is abuse of dominance defined and identified? What conduct is subject to a per se prohibition?

Abuse of dominance as provided in article 9 of the FTA includes:

• directly or indirectly preventing by unfair means other enterprises from competing;
• improperly setting, maintaining or changing the price for goods or the remuneration for services;
• making a trading counterpart give preferential treatment without justification; and
• other abusive conduct (all-inclusive provision).

The above-mentioned ‘unfair means’, ‘improperly’, ‘without justification’ and the all-inclusive provision itself are not strictly defined legal concepts, so Taiwan’s approach may be better characterised as effects-based. The TFTC usually makes its findings based on whether the enterprise leveraged its dominance to prevent, obstruct or block competitors, or otherwise affected market competition. However, a refusal to deal by a dominant enterprise appeared to have more easily led to a conclusion of abuse of dominance (TFTC Decision Gong-Chu-Zi No. 089170). The recent TFTC decision against Qualcomm (TFTC Gong-Chu-Zi No. 106094) also appeared to have concluded that a standard essential patent (SEP) holder’s refusal to license its SEPs under fair, reasonable and non-discriminatory commitments constitutes abuse of dominance. However, the Qualcomm decision has since been replaced by a settlement agreement between the TFTC and Qualcomm in litigation, under which Qualcomm committed to take certain actions to address the anticompetitive concerns with its SEP licensing activities.

Does the concept of abuse cover both exploitative and exclusionary practices?

Yes, both exploitative and exclusionary practices are contemplated by the TFTC as abuse of dominance under the FTA.

What link must be shown between dominance and abuse? May conduct by a dominant company also be abusive if it occurs on an adjacent market to the dominated market?

According to the FTA, the abusive conducts of monopolistic enterprises must be directly or indirectly related to its market dominance. However, it is possible for conduct of a dominant enterprise to be deemed as abusive if the enterprise improperly extends its market power into other product or service markets by tie-in, package deals or other means.

What defences may be raised to allegations of abuse of dominance? When exclusionary intent is shown, are defences an option?

As mentioned above, the monopolistic enterprise may justify the economic rationalisation and legitimacy of its behaviour. For example, the TFTC presently has determined that different or preferential pricing with justification implemented by telecommunications and digital convergence enterprises shall not be deemed as an abuse of dominance. Theoretically, efficiency gains may be used to justify the alleged abusive conduct; however, in practice, it would be weighted, along with all other factors such as intent, to determine the legality of the alleged abusive conduct.

It is worth noting that a monopolistic enterprise’s intent and justification for its conduct are already part of the criteria for determining whether there is abuse of dominance and thus, the legitimacy of the conduct at issue will be determined on a case-by-case basis. In practice, it may be more difficult to defend the conduct if exclusionary intent is demonstrated. For example, in the aforementioned Qualcomm decision, the TFTC held that Qualcomm acted to exclude its competitors despite Qualcomm presumably presenting evidence justifying its actions.

In contrast, when a monopolistic enterprise was able to substantiate that its refusal to deal has nothing to do with exclusionary intent but was merely the result of the other party’s failure to abide by the long-standing practices to process the deal, it may successfully be found to have not engaged in abusive conduct (Supreme Court 2015 Decision Pan-Zi No. 53).