• Taiwan Strengthens Its Fair Trade Law
  • December 6, 2011 | Authors: Thomas T. M. Chen; Louis Y.S. Liu
  • Law Firm: Jones Day - Taipei Office
  • The Legislative Yuan of Taiwan has passed new amendments to its Fair Trade Law ("FTL").  One of the amendments adopts a leniency program for cartel investigations, which has been a common practice in the U.S., EU, and other jurisdictions for a number of years.  Another raises the monetary penalty cap for monopolies and cartels to 10% of the violator's annual turnover.  In addition, for cases of false advertising, the amendments impose joint and several liability on the advertising agent and any person who recommends a specific product or service knowing that such recommendation is likely misleading.  The amendments will take effect after the President's announcement, likely by the end of 2011.

    Adoption of leniency program

    The leniency program has been a much-discussed antitrust topic in Taiwan since 2008, after the U.S. Department of Justice brought charges against several Taiwanese LCD-panel enterprises for price-fixing that was disclosed by a cartel participant that received leniency.  This incident prompted the Fair Trade Commission of Taiwan ("TFTC") to propose the adoption of a leniency program.  As a result, a newly added article of the FTL will give TFTC the authority to reduce the penalty that would otherwise be imposed on violators participating in a cartel if (1) the violator was a member of a cartel and reported to the TFCT specific information and supporting evidence on illegal acts before the TFTC became aware of the cartel or (2) during a TFTC cartel investigation, the violator reports specific information and supporting evidence on the illegal acts to assist the TFTC in its investigation efforts.

    The FTL amendments also authorize the TFTC to promulgate the enforcement rules for the leniency program, which may include rules for determining which and how many enterprises would qualify for the leniency program and the standards for reducing or eliminating penalties. Such enforcement rules will be presented to TFTC Commissioners for their approval by the end of 2011.  After the promulgation of such enforcement rules and President's announcement of the FTL amendment, the leniency program will be available to the TFTC in its antitrust enforcement.

    Increased monetary penalties for monopolies and cartels

    Another issue that came into the spotlight due to the LCD cartel cases is that the FTL has authorized insignificant penalty fines for cartel violations.  Under the current FTL, the penalty fine is capped at NT$ 25 million (less than $1 million U.S. dollars), far less than the penalty that could be imposed by the U.S., EU, and other jurisdictions.  The newly amended Article 41 raised the penalty fine cap to the greater of 10% of the total sales turnover of the violator in Taiwan for the previous fiscal year or NT$ 25 million.

    Advertising agents and Recommender jointly liable in cases of false advertising

    The FTL amendments also impose joint and several liability on the advertising agent or any "Recommender" who recommends a specific product or service, if the agent or Recommender had actual or constructive knowledge that the recommendation would likely mislead a consumer. For a Recommender who is not a celebrity or a professional or institution that practices in the area of the recommended product or service, liability will be capped at 10 times of the compensation the Recommender received from the recommendation.

    Observations

    The FTL amendments suggest that the TFTC will become a more aggressive antitrust enforcer.  In November 2011, TFTC announced its decision to impose a NT$20 million (US$ 0.67 million) fine against four convenient store chains for fixing the price of freshly brewed coffee.  In October 2011, it announced a fine of NT$30 million (US$1 million) on three domestic food companies for coordinating an increase in the price of milk.  These fines are the two highest imposed by the TFTC since its establishment in 1991.  The FTL amendments undoubtedly will encourage the TFTC to pursue antitrust enforcement even more aggressively.