For the past couple of years, new innovative business models have started to emerge on the market. To address industries’ operational needs, the Taiwan Fair Trade Commission (“FTC”) issued a public notice on 6 June 2023, announcing that draft amendments to the Taiwan Fair Trade Act (“FTA”) were underway. These amendments aim to counteract the impact of legal regulations on market competition and ensure that the relevant laws cater to the evolving needs of the modern market. FTC was accepting third parties’ suggestions towards the content of these draft amendments until 5 August 2023.

The main points of the draft amendments are as follows:

1. Delete “market share” from the conditions of assessment that require mergers to be reported to the authorities (Draft amendment to Article 11 of the FTA).

Currently, the FTA determines whether or not a merger must be reported to the authorities based on the merging entities’ “market share” and “total sales amount.” If the merged entity acquires at least one-third of the market share as a result of the merger, or if any of the to-be-merged enterprises already holds a market share of at least one-quarter of the market share before the merger, then the FTC must be notified prior to the closing of the transaction.

To calculate market share, the scope of the “relevant market” must be defined first. Afterwards, calculations must be made to define “market size,” “individual sales figures,” and “percentage of sales revenue relative to other suppliers in relevant sectors.” For companies, these eligibility standards can pose a variety of issues, which may arise from difficulties in defining the market and ambiguous parameters used to make calculations.

A company’s “total sales amount” is usually the international standard used to assess whether certain mergers are required to be reported. As such, to clarify the reporting requirements surrounding mergers and reduce the costs associated with legal compliance, this amendment proposes to delete “market share” as an assessed standard to determine merger reporting requirements (Article 11, subparagraph 1 and 2 of the FTA). By deleting “market share”, this amendment proposes using “total sales amount per year” as the sole determinant to assess whether a company is legally required to notify the authorities about the merger. This amendment will simplify the assessment process to determine whether mergers are subject to reporting requirements.

2. Expand the scope of definition for “enterprises” as it pertains to “concerted action.” (Draft amendment to Article 14 of the FTA)

Currently, Article 14 of the FTA defines the term “concerted action” as “joint determination of price, products, trading counterparts, etc., by competing enterprises at the same production and/or marketing stage, by means of contract, agreement or any other form of mutual understanding.” In reality, collusive practices influencing the market’s supply-demand curve involved in “concerted action” is not limited to that between competing enterprises at the same production or marketing stage, but can also be between “direct competitors and their upstream/downstream businesses” or “non-competing companies that are actively contributing to other businesses’ engagement in horizontal competition.” As such, this most recent amendment seeks to extend the regulatory scope of “concerted action”, by including as part of its definition “third party enterprises that facilitate or participate in competing enterprises at the same production and/or marketing stage” that mutually agree to limit business activity to the extent that influences the market’s supply and demand. The goal of this amendment is to strengthen the FTC’s regulatory power over collusive practices.

3. Delete article relating to “improper offerings of gifts or prizes.”

Article 23 of the FTA currently prohibits enterprises from giving out improper offerings or gifts to gain trading opportunities. According to the “Regulations Governing the Amount of Gifts and Prizes Offered by Businesses” published by the FTC, if the price of a company’s product or service exceeds TWD 100 (c. USD3), the value of any promotional gifts received as a result of the purchase cannot exceed one-half of the purchased product’s price. In addition, when a business conducts a prize-giving activity, the value of the highest prize shall not exceed TWD 150 million.

Considering that promotional events can encourage new businesses and products to enter the Taiwan market and given that international competition law rarely implements regulations limiting the scope of prize offerings to ensure the free flow of the market, this amendment seeks to delete Article 23.

4. Specify regulations for “corporate investigations” and responsibilities for breaching obligations. (Draft amendment to Article 27-1)

To strengthen the FTC’s enforcing power with regard to the restraint of competition and unfair competition between businesses, this amended article provides that the FTC – out of its “legitimate goals of defending freedom and fair competition” – can initiate investigations on the market’s structure, transactional behavior, and status of competition between specific markets. During these investigations, the FTC can demand that industries provide explanations or necessary information. In principle, the investigated companies cannot avoid, block, or refuse such a demand by the FTC. If the company unjustifiably refuses to meet, cooperate, or provide information, the infringer will be subject to an administrative fine under Article 44.

5. Add “electronic newsletter” as a communication channel whereby the content of judgments is published. (Draft amendment to Article 33)

Article 33 of the FTA currently provides that the injured party is entitled to request for the content of the judgment to be published via “newspapers.” Given the proliferation of the Internet and social media as the primary means of exchange, transmitting, and receiving information, this amendment adds “electronic newsletters” as the judgment’s mode of publication, to fulfill current societal needs.

6. Add “administrative penalty” as one of the potential consequences to violating merger control policies. (Draft amendment to Article 39, paragraph 3)

Article 39 of the FTA currently provides that if an enterprise violates paragraphs 1 and 2, the FTC may order for the enterprise’s dissolution, suspension, or termination of business operation. However, these consequences may be unduly harsh for violations committed under certain circumstances, which may result in damage that is disproportionate or not easily reversible. As such, this amendment adds “penalty” as a potential consequence to merger control violations, to give the FTC more flexibility in imposing varying degrees of punishment based on the individual circumstances of each case.

7. Delete provision outlining administrative responsibilities arising from commercial defamation. (Draft amendment to Article 42)

Currently, the administrative regulatory scope applicable to Article 42 of the FTA includes commercial defamation provided by Article 24. Considering that Article 37 of Taiwan’s FTA currently provides that engaging in commercial defamation can give rise to criminal charges, and the fact that Germany and Japan currently do not criminalize commercial defamation, this amendment proposes to delete the administrative responsibilities arising from behavior associated with “commercial defamation.”

This is a translation of the original article in Chinese, which can be found here. Written by Gary Kuo, and May Lu. Translated by Emma Chiu.

22 August 2023