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Amendments to the Taiwan Fair Trade Act



Amendments to the Taiwan Fair Trade Act

On January 22 2015, the Legislative Yuan approved the amendments to the Taiwan Fair Trade Act ("TFTA").  The amendments tantamount to the most sweeping reform of the TFTA since it came into effect in 1992.  The amendments cover a wide range of legal provisions under the TFTA, such as merger control, cartel enforcement, restrictive competition, and unfair competition, which will have significant impact on companies' business operations in the future as well as their compliance guidelines.

Below are the key features of the amendments and our analysis thereof:

I.      Merger Control

1.     When assessing whether a transaction constitutes a combination and whether any filing threshold is met, the new law prescribes that in addition to the turnovers and shareholding of the party's parent/subsidiary, those of affiliate companies (including brother/sister companies under common control) should also be taken into consideration. 

2.     Apart from holding shares through corporate entities, it is not uncommon for an enterprise's business operations or appointment of personnel to be under the control of certain individuals.  It is also common for an enterprise to hold shares in another enterprise through natural persons or non-corporate entities.  As the transactions of the above-mentioned shareholding structures may have the same effect as a combination under the TFTA, the new law stipulates that those natural persons or non-corporate entities, which have controlling shareholding in a company, should also be subject to the merger control rules even though they are not corporate entities.   

3.     The review period for a merger filing case has been revised from 30 days with a possible extension of an additional 30 days to a possible extension of an additional 60 days as the original period may not be sufficient for the agency to thoroughly analyze a case which may have potential anti-competition effect. 

4.     With an aim to tailoring appropriate merger control rules for some specific industries, the new law stipulates that the Taiwan Fair Trade Commission ("TFTC") is authorized to publish different turnover thresholds applicable to different industries. 

5.     It is noteworthy that the amended TFTA follows the old law in implementing a dual filing threshold system.  The TFTC's proposal of removing the market share filing thresholds did not pass the Legislative Yuan's final review. 

II.     Cartel Regulations

1.     In the past, the TFTC often ran into difficulty securing direct evidence to prove the existence of a cartel.  To enhance the TFTC's enforcement effectiveness, the amended TFTA permits the TFTC to presume the existence of an agreement on the basis of circumstantial evidence, such as market conditions, characteristics of the products or services involved, and profit and cost considerations, etc.  By way of this amendment, the new law substantially shifts the burden of proof regarding the existence of an agreement among competitors from the TFTC to the enterprises that are investigated or penalized.  Thus, in the future, for an enterprise under investigation, it is advisable to present evidence in a timely manner to prove that its business decision was made independently and reasonably to rule out any possibility of being viewed as participating in a price-fixing scheme due to parallel activities in the market. 

2.     The fine for any violation of the cartel regulations as well as other anti-competition practices has been doubled.  Under the new law, the fine for a first-time violation ranges from NTD 100,000 to NTD 50 million, and that for repeated violations, from NTD 200,000 to NTD 100 million.   Nonetheless, the maximum fine for a material violation of the cartel regulations remains the same as the old law and is still capped at 10% of the violating enterprises' sales revenue in the last fiscal year.

3.     By following the Administrative Penalty Act, the new law empowers the TFTC to seize anything found during investigation that may serve as evidence.  Nonetheless, the TFTC's proposal of introducing the right to search and seize (i.e., the dawn-raid) did not pass the Legislative Yuan's final review due to the concerns that such dawn-raid power may be unconstitutional.

4.  In most cases, the facts associated with anti-competition issues are so complicated that it takes the agency a long time to investigate and analyze.  Moreover, the TFTC needs to spend more time in doing economic study and analysis to complete its findings and decisions.  Given such, the statute of limitations on administrative sanctions for an anti-competition case has been extended from 3 years to 5 years.

III.   Resale Price Maintenance

By referring to the international trends, the resale price maintenance regulations are no longer per se illegal but are amended to adopt the rule-of-reason standard.  The new law may offer greater flexibility for pricing arrangements between upstream manufacturers and downstream distributors.

IV.   Structure Amendments

1.     The TFTC is allowed to abort an investigation to save administrative cost, if the business ceases its illegal conduct and undertakes corrective measures.

2.     As the TFTC is recognized as an independent agency, having expertise and credibility, the new law stipulates that without going through the administrative appeal process, the penalized party can directly file a lawsuit with the administrative court to seek a remedy.

As all these changes have resulted in an overhaul of the TFTA, we can expect to have virtually a new competition law environment in Taiwan.  Meanwhile, companies are advised to follow the new law to adequately update their internal compliance guidelines.

If you have any further inquiries, please do not hesitate to contact us.

 


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