Enforcement proceedings in dominance in Taiwan

Enforcement proceedings

Which authorities are responsible for enforcement of the dominance rules and what powers of investigation do they have?

Per article 6 of the FTA, the TFTC is the central competent authority on enforcement of dominance rules. The TFTC may investigate ex officio, notify the parties and any related third party to appear to make statements or submit necessary materials or exhibits, dispatch personnel for on-site inspection, etc. The TFTC may seize any article obtained from the investigation that may serve as evidence despite rarely doing so in actual practice (article 26 and 27 of the FTA).

Although abuse of dominance may occasionally involve criminal liability, the FTA prioritises enforcement of administrative authority; the prosecutor only enters into the investigation when the actor persists in refusing to rectify its conduct after administrative sanctions have been issued. Consequently, it is rare in practice for a prosecutor to initiate criminal prosecution for violations of the FTA.

What sanctions and remedies may the authorities impose? May individuals be fined or sanctioned?

For abuse of dominance, the TFTC may order the enterprise to cease therefrom, rectify its conduct or take necessary corrective action within the time prescribed in the order; in addition, it may assess upon such enterprise an administrative penalty of not less than NT$100,000 but no more than NT$50 million. If such enterprise fails to rectify its conduct as ordered, the TFTC may successively assess an administrative penalty of not less than NT$200,000 but no more than NT$100 million for each failure until rectification. For serious violations of the FTA, the TFTC may impose an administrative penalty up to 10 per cent of the total sales income of an enterprise in the previous fiscal year without being subject to the aforementioned limit of administrative fines (article 40 of the FTA regarding the calculation of administrative penalties of serious violations of articles 9 and 15).

The above-mentioned ‘rectifying conduct or taking necessary corrective action’ includes specific performance, such as in the Qualcomm decision, in which the TFTC ordered Qualcomm to cease and desist from continuing to apply specific offending contractual terms, as well as accept requests from chipset or handset manufacturers to renegotiate those contracts.

While ‘structural remedies’ may in theory part of the ‘rectifying conduct or taking necessary corrective action’, as the FTA only prohibits the dominant enterprise from abuse of dominance rather than causing the enterprise to no longer be dominant, the TFTC has never prescribed structural remedies for FTA violations.

For criminal liabilities, continued failure to comply with the TFTC’s order or a return to engaging in the same violations may result in imprisonment for not more than three years or detention, or by a fine of not more than NT$100 million, or by both. Moreover, according to articles 15 and 16 of the Administrative Penalty Act, when an enterprise is in violation of the FTA, natural persons, whether they are the directors of the enterprise or any other individuals with the authority to represent the enterprise whose intentional act or gross negligence caused the enterprise to be in violation of the FTA, or other employees whose failure to properly perform their duty to supervise led to the violation of the FTA, shall likewise be levied a fine. However, as mentioned above, the prioritisation of the enforcement of administrative authority over the judicial in the case of the FTA has caused criminal prosecution for FTA violations to nearly completely disappear.

Can the competition enforcers impose sanctions directly or must they petition a court or other authority?

The TFTC may impose sanctions directly on the enterprise.

What is the recent enforcement record in your jurisdiction?

In the past, the rules on abuse of dominance were rarely enforced by the TFTC, but the trend seems to have changed in recent years. As stated above, some of the landmark cases in this area were only determined in the past decade. The latest high-profile decision is the Qualcomm decision, in which the TFTC imposed on Qualcomm a record fine of NT$23.4 billion for its abuse of dominance and the settlement agreement replacing this decision. In general, the improper setting of the price for goods or the amount of royalties, as well as the refusal to deal are the most common type of abusive conducts sanctioned.

Where a clause in a contract involving a dominant company is inconsistent with the legislation, is the clause (or the entire contract) invalidated?

According to court practices, a contractual clause that is inconsistent with the provisions of article 9 of the FTA does not invalidate the clause or the entire contract; however, the conduct must cease, and there are grounds to claims for damages, as well as the exclusion and prevention of infringement (Taiwan Shilin District Court Decision 2007 Chong-Su-Zi No. 268, Intellectual Property Court Decision 2012 Min-Zhuan-Shang-Geng(II)-Zi No. 3).

To what extent is private enforcement possible? Does the legislation provide a basis for a court or other authority to order a dominant firm to grant access, supply goods or services, conclude a contract or invalidate a provision or contract?

Private enforcement is allowed under the FTA; however, it is more related to damages rather than specific performance remedy. However, certain types of specific performance are available under article 29 of the FTA: an enterprise may petition a court to order another to cease and desist from infringing (or prevent, if there is a risk of infringement) on its rights through an FTA violation.

Do companies harmed by abusive practices have a claim for damages? Who adjudicates claims and how are damages calculated or assessed?

Yes, any enterprise that has been harmed by abusive practices may file for damages at the civil courts in Taiwan. Treble damages may be available for intentional abusive practices. Profits from abusive practice may be requested to be used as a basis for assessing damages (articles 30 and 31 of the FTA).

Although the FTA provides the legal basis for civil remedies, the private enforcement of claim for damages arising from restrictive competition in Taiwan is still rare, even as there are already examples of enterprises filing claims for damages in concerted action cases. One of these is Apple, which has initiated an action against Qualcomm in Taiwan under article 29 of the FTA demanding it to stop abusing its dominant position in mobile communications SEP licensing and baseband chipset sales, and Apple is seeking NT$10 million in damages under article 30 of the FTA. This action is currently pending.

To what court may authority decisions finding an abuse be appealed?

The TFTC’s decision may be challenged by filing an administrative lawsuit with the High Administrative Court. Appeals for cases involving intellectual property rights may be filed with the Intellectual Property Court. Administrative lawsuits have two instances where the first instance review and decide both the facts and the law, while the second and final instance only reviews matters of law.