Key Legislation Governs Taiwan's Competition

The Fair Trade Act and the Enforcement Rules of Fair Trade Act are two basic rules pertaining to various competitive behaviours in Taiwan. This field of law may be roughly divided into two parts: restraints of competition and unfair competition.

Restraints of competition include monopoly, merger, cartel behaviour, restrictions on resale prices and other restraints of competition.

Unfair competition includes false advertisement, counterfeits of unregistered famous trademarks or symbols, improper offerings of gifts or prizes, and trade libel.

It should be mentioned that the Fair Trade Act also provides a general clause in article 25, which also regulates other types of behaviours that are not expressly covered by the provisions of the Fair Trade Act and may in some cases extend to the field of consumer protection.

In addition, the Fair Trade Commission published important guidelines in the "White Paper on Competition Policy in the Digital Economy" at the end of 2022, to reveal its position and direct law enforcement towards the potential impacts of new business models and behaviours on market competition in the digital economy.

The Fair Trade Commission Is in Charge of Enforcing Competition Law in Taiwan

The Fair Trade Commission is the law enforcement agency of the Fair Trade Act, in charge of administrative investigation and sanctions for matters in violation of the Fair Trade Act. Furthermore, applications for enterprise mergers and for exemptions of cartel behaviour are also under the Fair Trade Commission's scrutiny and power of approval.

The Fair Trade Act mainly covers enterprises, including companies, sole proprietorships or partnerships, and any other person or organisation engaging in the provision of goods or services. A trade association organised by businesses, or any other organisation lawfully established to promote the interests of its members, is referred to as an enterprise in this Act. It should be noted that, in some exceptional cases, enterprise insiders or other natural persons are also regulated by the Fair Trade Act.

The Fair Trade Commission also has jurisdiction over a foreign enterprise that involves a violation of the Fair Trade Act, when all or part of its "conduct" or "consequence" occurs within the territory of China. In practice, the Fair Trade Commission has sanctioned foreign enterprises. For example, in the case of Qualcomm Incorporated, the Fair Trade Commission held that although Qualcomm Incorporated's registered office is located outside the territory of Taiwan, most Taiwanese mobile phone brand owners and original equipment manufacturers sign licensing agreements with and pay royalties to Qualcomm Incorporated, and the Taiwan company MediaTek is also a competitor to Qualcomm Incorporated, so Qualcomm Incorporated's patent licensing and chip sales fall within the jurisdiction of the Fair Trade Commission.

Regarding merger applications, the Fair Trade Commission enacted the "Principles for Handling Overseas Merger Cases" for factors that should be considered in its decision on the issue of jurisdiction. The most important factor is "whether there will be a direct, essential and reasonably foreseeable impact on the domestic market resulting from the merger". For example, although the merger Walt Disney Company/Twenty-First Century Fox, Inc, occurred outside the territory of Taiwan, these two companies release films and supply TV channel programmes in Taiwan, so the Fair Trade Commission believed that it should have jurisdiction over this case since the merger could have a direct, essential and reasonably foreseeable impact on the domestic market.

Consequences of Non-compliance

Three types of liabilities may be incurred through violation of the Fair Trade Act:

• Administrative liability: if any behaviour of an enterprise is found to be a violation of the Fair Trade Act, the Fair Trade Commission may order that such behaviour shall be stopped or corrected or other necessary corrective measures shall be taken, and a fine of not more than NT$50 million may be imposed. In addition, if an enterprise violates the prohibition of monopoly and cartel behaviour and it is determined by the Fair Trade Commission that the violation is grave, 10 per cent of the enterprise's sales in the previous fiscal year will be used as the upper limit of fines, that is, the amount of fines will not be subject to the maximum limit of NT$50 million.

• Criminal liability: in terms of restraints of competition, if an enterprise violates the regulations of monopoly, cartel behaviour, restrictions on resale prices and other restraints of competition but does not stop the violation or the same violation reoccurs after being fined by the Fair Trade Commission, the perpetrator will be ordered to bear criminal liability. In terms of unfair competition, the perpetrator and the related enterprise who engage in trade libel are also criminally liable.

• Civil liability: an enterprise that violates the Fair Trade Act and so infringes the rights and interests of others shall be liable for civil damages. In addition, the victim also has the right to request for removal and prevention of infringement.