Fair Trade Commission Disposal Directions (Guidelines) on Approval of Concerted Pricing among Small or Medium-sized Enterprises
Passed by the 160th Commissioners' Meeting on November 2, 1994
Amended by the 417th Commissioners' Meeting on November 3, 1999
Promulgated by Order (88) Kung Fa Tzu No. 03182 on November 9, 1999
Passed by the 688th Commissioners' Meeting on January 13, 2005
Promulgated by Order (94) Kung Fa Tzu No.094001284 on February 24, 2005
Promulgated by Order (94) Kung Fa Tzu No.094006973 on August 26, 2005
Amended by the 1057th Commissioners' Meeting on February 8, 2012
Promulgated by Order Kung Fa Tzu No. 1011560288 on March 12,2012, and made retroactive to February 6, 2012
Amended by the 1283rd Commissioners' Meeting on June 8, 2016
Promulgated by Order Kung Fa Tzu No. 10515603621 on June178, 2016
Amended by the 1310th Commissioners' Meeting on December 14, 2016
Promulgated by Order Kung Zhi Tzu No. 10513608261 on December 26, 2016
These Guidelines are formulated with a view toward stimulating efficient competition among small or medium-sized enterprises, upholding orderly transactions and the interests of consumers, and benefiting the economy and public interest.
- Eligible Entities
The eligible entities shall be "small or medium-sized enterprises" referred to in Article 15(1)(vii) of the Fair Trade Law (here in after referred to as "the Law"). According to Article 21 of the Enforcement Rules of Fair Trade Act, "the small and medium-sized enterprises mentioned in Article 15(1)(vii) of the Fair Trade Law shall be determined in accordance with the Statute for Development of Small and Medium-sized Enterprises."
- Subject Matters
Concerted pricing activities of medium-sized or small enterprises (or setting of uniform prices by medium-sized or small enterprises) that are beneficial to the economy and public interest.
- Legal Basis
Pursuant to Article 15(1)(vii) of the Law, enterprises shall apply to the Fair Trade Commission (hereinafter referred to as the FTC) for permission "to take concerted action in order to improve the operational efficiency or strengthen the competitiveness of the small or medium-sized enterprises concerned."
- Principles for Exemption
Since concerted pricing by small or medium-sized enterprises will restrict price competition, enterprises may apply to the FTC for approval only if their concerted pricing activities are beneficial to the economy and in conformity with one of the following principles:
- Principle of transaction stability. In sporadic commodity or service transactions which are highly similar in nature and which involve small amounts of money, the transaction costs such as costs for inquiries (or negotiations) may be reduced; the competition in efficiency may be enhanced among suppliers of goods or services; and that unfair trading acts may be prevented where the trading counterparts are rushed into transactions and taken advantage of.
- Principle of information transparency. The purpose and effects of concerted pricing in commodity or service transactions are such that they do not affect supply and demand or current international pricing; that there are international market price as reference; or that the disclosure of such information as valuation method, valuation base, and relevant parameters, can facilitate the acquisition of trading information, lessen the social costs of transactions, and help create trading opportunities.
- Application Requirements
- Small or medium-sized enterprises which are parties to concerted pricing action shall submit their concerted pricing proposals to the general meeting of the trade association of which they are members for approval and allow the trade association to apply for approval on their behalves.
- The said small or medium-sized enterprises shall allow their trade association to consult with the organization to which their trading counterparts belong, in order to reach a consensus on concerted pricing, reasonable prices and obtain a letter of consent.
- To enhance the efficiency of concerted pricing, the trade association representing the said small or medium-sized enterprises shall, when applying for approval on their behalves, propose a self-disciplinary code or implementing procedures that are consistent with the spirit of the Law.
Small or medium-sized enterprises, which are parties to a concerted pricing action, shall, in the spirit of Article 12 of Enforcement Rules of Fair Trade Act, allow their trade association to apply for approval on their behalves.
- Application Procedures
- Preparatory Procedures
- If the small or medium-sized enterprises are convinced concerted pricing is in keeping with the aforementioned principles and beneficial to the economy and public interest, they shall submit their reasons in writing to the FTC for preliminary review.
- If, through preliminary review, the FTC tentatively recognizes concerted pricing by the said medium-sized or small enterprises is in keeping with the aforementioned principles, the said small or medium-sized enterprises may apply for permission to request their trade association to apply on their behalves for approval for uniform prices. Prior to applying, the trade association shall consult with the organization representing the trading counterparts of the said medium-sized or small enterprises, in order to reach a consensus on concerted pricing activities and reasonable prices.
- Application Formalities and Documents Required
- After the FTC has approved a concerted pricing proposal in preliminary review and consulted with the organization representing the trading counterparts of the small or medium-sized enterprises which are parties to the concerted price action, the said small or medium-sized enterprises shall allow their trade association to apply to the FTC on their behalves.
- Documents required: In addition to complying with Articles 13, 14 and 20 of the Enforcement Rules of Fair Trade Act, the applicant shall produce documents showing, minutes of general meeting of the trade association which, by resolution, consents to applying for approval for concerted pricing on behalf of the said small or medium-sized enterprise; a list of uniform prices (or valuation formulae); reports testifying to compliance with the principles governing concerted pricing by medium-sized or small enterprises; records of consultations with the organization representing the trading counterparts of the said medium-sized or small enterprises; a letter of consent; the self-disciplinary code or implementing procedures prepared by the trade association representing the said small or medium-sized enterprises, and any other documents required by the FTC.
- Criteria for Review
- Whether the organization representing the trading counterparts has been consulted and a consensus has been reached with it on concerted pricing.
- Whether concerted pricing in conformity with the principles of "transaction stability" and "information transparency."
- Whether the uniform prices resulting from concerted pricing are "reasonable prices."
- Whether concerted pricing is beneficial to the economy and public interest.
- Procedures for Review
To keep pace with the applications of medium-sized and small enterprises, the FTC shall review their applications in two steps, namely preliminary review and final review.
- Preliminary Review:
Applications shall be reviewed to determine whether they are in conformity with the principles of "transaction stability" and "information transparency." Applications found incompatible with the two principles shall be rejected.
- Final Review:
Applications shall be processed through a review of essential formal conditions (examination of documents) and a review of essential substantive conditions. The review of essential substantive conditions may consist of public hearings or seminars attended by academics, specialists, organizations representing the trading counterparts, other relevant organizations, trade associations, target industries, and social and administrative authorities.
If after review, a concerted pricing case is found to be in conformity with the principles stated under Article 5 above and beneficial to the economy and public interest, approval shall be granted in accordance with Article 15(1)(vii) of the Law, with or without attached conditions, restrictions, and undertakings.
Applications shall be rejected during review of essential formal conditions if the applicants fail to furnish the necessary documents or fail to make up for inadequacies. If an application for concerted pricing is found to be not in conformity with the principles stated under Article 5 above or not in compliance with the essential conditions stated in Article 15(1)(vii) of the Law, the application shall be rejected.
- Approved Exemptions for Concerted Pricing
In the event a case of concerted pricing is found to be in conformity with the principles stated under Article 5 above and beneficial to the overall economy and public interest, the reasonable price(s) advocated by the applicant shall be made the price ceiling (the applicant shall not ask that the price it advocates be made a uniform price applied to all members). In the event of special transactions, where fixed prices involve both buying and selling prices, or in the event the information transparency is called for, approval for setting both the maximum and minimum prices and for certain valuation methods may be granted. The approval date and expiration of approval shall be determined by the FTC on a case-by-case basis.
- If the approval of a concerted action requires report for any change in participating enterprises for record, the participating enterprises of the concerted action shall file the following documents for record: the basic information on the newly participating enterprise; certificates of incorporation or establishment of each participating enterprise; eligibility to be considered as small or medium-sized enterprises ;quarterly reports for the past three years on the prices, production, and sales values (volumes) of those products or services relevant to the concerted action, of each participating enterprise; financial statement and operating report of each participating enterprise for the preceding fiscal year(could be substituted by balance sheet or income statement ); information of the market structure relating to horizontal and vertical competition relations of the participating enterprises; documents detailing the resolution by which the general meeting of their trade association consented to applying for approval on their behalves; and a copy of the original approval.
- The Disposal Directions (Guidelines) shall become effective as of the date of approval, by resolution of the FTC.
- Resolution of the 195th Commissioners' Meeting: Concerted pricing by small and medium-sized enterprises as approved by the FTC shall be discretionary in nature. Failure by an approved small or medium-sized enterprise to abide by such pricing does not in itself violate the substance of the FTC's approval; however, whether it constitutes a violation of applicable provisions of the Law and the related regulations shall be determined on a case-by-case basis.
- Resolutions of the 187th Commissioners' Meeting:(i)A Qualified Land Registration Agent is an "enterprise" under Article 2(iv) (Amended as Article 2(1)(iii)) of the Law and therefore is regulated by the Law. Article 22 (Amended as Article 21) of the Enforcement Rules of Fair Trade Act provides, "The definition of a small or medium-sized enterprise as referred to in Article 14(vii) (Amended as Article 14(1)(vii))of the Law shall be in accordance with the criteria set forth in the Statute for the Development of Small and Medium-Sized Enterprises." Article 2(2) of the Statute for the Development of Small and Medium-Sized Enterprises differentiates between large enterprises and small and medium-sized enterprises based upon sector, capitalization, turnover, and total assets. A Qualified Land Registration Agent with annual turnover of NT$40 million (having been revised to be NT$100 million) can be deemed to be a small or medium-sized enterprise pursuant to Article 2(1)(iv) (Amended as Article 2(2)) of the Criteria for Determination of Small and Medium-Sized Enterprises.
(ii) The trading counterparts of a Qualified Land Registration Agent should encompass associations such as consumer protection groups and commercial and industry associations in the construction and property development sector. (See Commission Letter dated 20 May 1995, Ref. (84) Kong Yi Tzu No. 3561.)
- Annex: A Schematized Representation of the FTC's Processing and Review Procedures for Exemptions of Concerted Pricing by Small and Medium-Sized Enterprises.