THE 2015 AMENDMENTS OF THE TAIWAN
FAIR TRADE ACT AND ITS IMPLICATIONS
FOR CARTEL ENFORCEMENT
The Use of Economic Evidence and the Introduction of
Antitrust Fund
Andy C. M. Chen
Professor of Law, Department of Financial and
Economic Law, Chung Yuan Christian University,
Taiwan
Yale Conference on Problems with Global Antitrust
Enforcement
February 19-20, 2016
INTRODUCTION


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
The Taiwan Fair Trade Act (TFTA) was promulgated in 1991 and took effect
in 1992
Cartel cases comprise only a low percentage of the cases decided by the
Taiwan Fair Trade Commission (TFTC)
More approving view on cartel:
1. Cooperation is needed for SMEs in Taiwan to compete internationally
2. Negligible impacts on domestic markets
More reproachful view on cartel:
1. Cartels are the results of the deficiencies of law enforcement and
legislation
2. Required as markets becoming more globalized/necessary for preventing
anticompetitive harms by foreign companies
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BACKGROUND INFORMATION: SUBSTANTIVE
REQUIREMENTS (PRE-2015 AMENDMENTS)

The Enforcement Principle: The “administrative action takes precedence over criminal liabilities”
principle (Article 34):
1. The Taiwan Fair Trade Commission (TFTC) has the exclusive jurisdiction over first-time violations
/ criminal investigations could only be initiated for repeated offenses

Definition of “Cartel” (Article 7 of the TFTA)
1. “competitor” within the same horizontal market level / excluding vertical collusion
2. “agreement” or “any form of communication of minds” would in effect lead to joint actions.
3. have the potential to affect market function
The TFTC may be open to the “de minimis” defense for this requirement as was
demonstrated in the case of Kaohsiung Association of Real Estate Appraisers
(adopting a market share of 10% as the threshold)

Article 19(4)of the TFTA (individual cartel member could be separately punished, especially when
collusive agreements were hard to be established)
“No enterprise shall… “cause another enterprise to refrain from competing in price, or to take part in a
merger or a concerted action by coercion, inducement with interest, or other improper means…”
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BACKGROUND INFORMATION: EXEMPTIONS

Article 14 of the TFTA
1. efficiency-enhancing cartels (Item 1, 2, & 3)
2. exemptions based on trade-policy consideration (e.g. “export cartel” and
“import cartel” in Item 4 & 5)
3. exemption of crisis cartels (Item 6)
4. exemption of cartels by SMEs (Item 7)
5. The TFTC could impose structural or behavioral remedies
when granting exemptions

Article 46 of the TFTA
1. when cartels are governed by other laws
2. the other laws take precedence only when they do not conflict with the
“legislative purposes” of the TFTA
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BACKGROUND INFORMATION: PROCEDURAL
RULES FOR CARTEL INVESTIGATION

Before 2011 amendments, the TFTC could request the
defendants to submit documents or summon witnesses, but
lacked the power of search and seizure.

The 2011 amendments introduced the leniency program, which
included the following two types of applicants (Article 35)
1. the investigation-initiation applicant: providing evidence
sufficient to initiating investigation by the TFTC
2. the investigation-assisting applicant: providing evidence with
added probative value to the TFTC’s investigations
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BACKGROUND INFORMATION: PROCEDURAL
RULES FOR CARTEL INVESTIGATION

The Leniency Regulations imposes several obligations on candidate
applicants
1. cease the illegal actions immediately
2. complete, honest, and continuous cooperation with the TFTC
3. applicants are prohibited from forging, concealing, or destroying
evidence

Reduction of administrative fines
1. First applicant: full immunity
2. Applicants not qualified for full immunity: fines reductions range from
50%~10%
3. Cartel initiators or instigators are also eligible for leniency application
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BACKGROUND INFORMATION: CALCULATION
OF ADMINISTRATIVE FINES

The Revised Article 41(2) of the TFTA increased the
maximum fines for serious cartel violations to 10% of the
total sales income of the previous fiscal year.

“Seriousness” will be evaluated by:
1. the violators’ motives and purposes
2. the scope and extent of the effect of the actions
3. the period for which the actions lasted
4. the market structure in which the actions occurred
5. the violators’ market positions
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ENFORCEMENT EXPERIENCE: THE EARLY YEARS

Competition advocacy against a deep-rooted business
culture emphasizing more on cooperation than rivalry

The TFTC’s inexperience was neutralized by the equally
“inexperienced” defendants; more than 40% of cartel
cases were orchestrated by trade associations

Evidence indicating collusive intent and agreements were
easier to gather during this phase
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ENFORCEMENT EXPERIENCE: THE YEARS OF TRANSFORMING TO
MORE EFFECTS-BASED ENFORCEMENT AND NEW CHALLENGES

New transaction models and their challenges to the definition of cartel under the TFTA,
notably from cases relating to IP licensing

Cases involving the use of circumstantial evidence to establish the existence collusive
agreements increased / the TFTC responded by relying more frequently but
controversially on advanced IO and / or game theories in case analysis

Representative cases in this enforcement period:
1. The Cement Cartel case: several inefficient preemptive arrangements among defendant
members such as purposefully creating over-capacity to deter entry were viewed as
mechanisms to facilitate cartel implementation
2. The Petroleum Cartel case: pre-announcements of price adjustments were
treated as a signal to competitor the intention to abide by price-fixing schemes
and an invitation for the competitor to join the cartel scheme
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ENFORCEMENT EXPERIENCE: THE ADVENT OF AN ERA
OF A GLOBALIZING TFTA

The leniency policy and the increased fine heralded this enforcement
phase

The Representative Cases:
1. International LCD Cartel Case and the extra-territorial application of
foreign antitrust laws
2. The application of the leniency policy: the DRAM Cartel Case and the
Capacitor Cartel (2015) Case
3. The application of the fine amendment: the IPPs (Independent Power
Providers) Cartel case (domestic companies) and Capacitor Cartel
(2015) Case (involving companies of Japan and Hong Kong)
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THE 2015 AMENDMENTS OF THE TFTA : ECONOMIC EVIDENCE AND THE
INFERENCE OF COLLUSIVE AGREEMENTS
Article 14 of the 2015 Amendments, including:
1. market structure;
2. characteristics of goods or services;
3. costs and revenues consideration;
4. economic reasonableness of firms’ conducts
 As a civil-law country, the amendment of this article is an attempt
to “codify” the factors that have been taken into account by the
TFTC in previous cases and, thereby, to increase the clarity and
predictability of law enforcement.
 Challenge for the TFTC:
-There appears to be a trend in the judicial branch that requires the
showing of collusion being the only rather than simply reasonable
conclusion derivable from those evidence

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ECONOMIC EVIDENCE AND THE INFERENCE OF
COLLUSIVE AGREEMENT: CASE ILLUSTRATION

The Petroleum Cartel Case (2005)
1. There are only two major petroleum companies in
Taiwan (China Petroleum and Formosa)
2. Retail gas price are still regulated by the government
according to a pre-specified formula
3. simultaneous price adjustments for retail gas to the
same degrees by the two companies for 19 times within a
2-year timeframe
4. The TFTC’s economic reasoning was affirmed by the
Highest Administrative Court
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ECONOMIC EVIDENCE AND THE INFERENCE OF
COLLUSIVE AGREEMENT: CASE ILLUSTRATION

Evidence supporting the findings of collusive agreements and violation:
1. market structure
highly concentrated market/ oligopolistic market
2. characteristics of goods or services
homogeneous product / inelastic demand and supply
3. costs and revenues consideration;
two companies have very different cost structures (CPC is partially owned by the government /
Formosa is a purely private and more cost-efficient company)
4. economic reasonableness of firms’ conducts
a multi-market-contact industry / infinite and repeated competition / each firm
needed to take into account the strategic moves by the other and respond accordingly
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ECONOMIC EVIDENCE AND THE INFERENCE OF
COLLUSIVE AGREEMENT: CASE ILLUSTRATION

The Industrial Paper Cartel (2010)
1. 3 major paper companies in Taiwan accounting for
90% market share in the market of first-level
industrial paper / also vertically integrated into the
markets of 2nd and 3rd-level industrial papers
2. Follow the same basic prices to calculate the final
prices for industrial papers
3. Case still pending in the High Administrative
Court after several appeals by the 3 companies
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ECONOMIC EVIDENCE AND THE INFERENCE OF
COLLUSIVE AGREEMENT: CASE ILLUSTRATION

Evidence supporting the findings of collusive agreements and violation:
1. market structure
highly concentrated market / high entry barriers
2. costs and revenues consideration
different cost structures but same price adjustments / abilities to absorb the costs from
“defect” papers are different, indicating non-independent price adjustments / the items
subject to price increases are the same across the three companies
3. economic reasonableness of firms’ conducts
during the periods of price increase, no company has ever attempted to lower prices to gain
more market share / the prices for the vertically integrated 2nd-level papers are higher than
those by independent suppliers of 2nd-level paper  all indicating the intention not to
compete!
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THE 2015 AMENDMENTS OF THE TFTA : NEW EXEMPTION AND THE
TERMINATION SYSTEM

Permitting exemption of liability for cartels having
the effects of facilitating industrial developments,
technological innovation, or business efficiencies
(Article 15 of the 2015 amendments)

Introducing the “termination” system which
authorizes the TFTC to suspend or terminate the
investigations if the investigated parties commit to
ceasing or correcting the violations (Article 28 of the
2015 amendments)
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THE 2015 AMENDMENTS OF THE TFTA : LONGER STATUTES OF
LIMITATIONS AND THE REPEALING OF “ADMINISTRATIVE APPEAL”
PROCEDURE

The statutes of limitations for investigation and
sanction was extended from 3 years to 5 years (Article
41 of the 2015 amendments)

The procedure of administrative appeal (appeal
within the executive branch) was repealed to allow
future appeals to be filed directly to the
Administrative Court (Article 48 of the 2015
amendments).
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THE 2015 AMENDMENTS OF THE TFTA : THE
ANTITRUST FUND (I)

Setting up “Antitrust Fund” to facilitate the investigation
of cartel (Article 47-1 of the 2015 amendments):

Sources of the fund:
1. 30% of the fines imposed according to the Act;
2. interest accrued on the fund;
3. budgetary allocations;
4. other relevant incomes.
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THE 2015 AMENDMENTS OF THE TFTA : THE ANTITRUST
FUND (II)

Fund to be used for the following purposes:
1. Rewards for the reporting of illegal concerted actions;
2. Promotion of cooperation, investigation and communication
matters with international competition law enforcement agencies;
3. Subsidies to the related expenses incurred from litigations
associated with the Act and rewards reporting of illegal actions;
4. Deployment and maintenance of databases in relation to the
Competition Law;
5. Research and development on the systems in association with the
Competition Law;
6. Education and advocacy of the Competition Law;
7. Other necessary expenditures to maintain the market order.
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REGULATIONS ON PAYMENT OF REWARDS FOR REPORTING
OF ILLEGAL CONCERTED ACTIONS (OCTOBER 7, 2015)

The specific amounts of rewards are to be determined
by the TFTC based on the value of evidence provided
by the informant within the Basic Amount (Article 5
of the Regulations)

The Basic Amount shall be 3% of the total amount of
the penalties imposed on the illegal concerted
actions
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REGULATIONS ON PAYMENT OF REWARDS FOR REPORTING
OF ILLEGAL CONCERTED ACTIONS (OCTOBER 7, 2015)

Specific criteria for granting rewards (Article 6):
1. providing evidence helpful for initiating investigation: 10% of the Basic
Amount, not exceeding NT$100,000
2. providing evidence that could prove directly the existence of cartel / no
further action by the agency is needed: 100% of the Basic Amount, not
exceeding NT$5,000,000
3. providing evidence that could prove directly the existence of cartel /
further action by the agency is needed: 80% of the Basic Amount, not
exceeding NT$4,000,000
4. providing evidence that could only prove indirectly the existence of
cartel: 50% of the Basic Amount, not exceeding NT$2,500,000
5. evidence do not meet the criteria in previous three paragraphs but offer
necessary clues for further investigations by the TFTC: 30% of the Basic
Amount, not exceeding NT$1,500,000
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Thanks for All Your
Attention
Comment and suggestions are
welcomed
Andy.acchen@gmail.com
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