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President Promulgates Newly Amended Articles of the Fair Trade Act

The amended Fair Trade Act (“FTA”) passed its third reading at the Legislative Yuan on January 22, 2015 and was promulgated by Presidential Order on February 4, 2015 under Zong-Tong-Hua-Zong-Yi-Yi-Zi-10400014311. With the exception of Articles 10 and 11, which will not take effect until thirty days after promulgation, the amended FTA immediately went into effect on the date of its announcement.
The newly amended articles represent the first comprehensive revision of the FTA since its promulgation in 1992 and include numerous significant changes. In addition to re-organizing the Act’s structure in order to distinguish the relevant provisions on restricting competition and unfair competition, there were also revisions to the application for merger; law enforcement in joint action; false advertisements; protection of well-known characteristics; right of investigation; and fines and penalties. The revisions are expected to have a major impact on the respective businesses. The following is a summary of the major revisions with respect to adjustments in legal and regulatory structure; unfair competition; administrative investigation and decisions; penalties and administrative remedies etc.:
(I).      Adjustments in legal and regulatory structure
1.    The previous provisions on “restriction on resale prices (formerly Article 18; now Article 19) and “actions which are likely to lessen or impede fair competition” (formerly Article 19; now Article 20) were originally categorized under “Unfair Competition”. The new act recognizes that such issues are those that have an impact on market competition and order and, as such, constitute behavior that restricts competition. They are therefore now categorized under the chapter “Restrictions on Competition”.
2.    It must be noted that the old Article 19, Paragraph 3 on causing counterparties to do business by inducement with interest or other improper means is by nature an unfair competition. Therefore it is separately provided in a new provision (Article 23) under “Unfair Competition”. The original provision pertaining to the improper procurement of production and sales secrets of a third party stipulated under Article 19, Paragraph 5 was deleted; instead, relevant provisions in the Trade Secrets Act should apply.
(II).    Unfair Competition
1.    With respect to the issues to be considered when determining whether or not there is false advertising, a new provision that provides general criteria is added. As long as any false, untrue or misleading indications or characteristics which are “related to the goods and may influence trading decisions” are represented in order to solicit trades with counterparties, the FTA would apply. The prices, quantities, quality, etc. of goods provided in the old act are now expressly stated as mere examples.
2.    A new provision is added to prohibit enterprises from promoting their businesses by way of improper gifts. In addition, such new provision authorizes the Fair Trade Commission (FTC) to formulate relevant rules in this regard. This new provision also replaces the old Article 19, Paragraph 3 and serves as the legal basis for the existing “Principles for FTC when dealing with cases on the limit of promotion of sales using gifts and prizes”.
(III). Investigation and Administrative Decision
1.    There are new provisions empowering the FTC to seize and retain items as evidence. It is also now specified, except where there is justifiable reason, that the party subject to investigation by the FTC is obligated to cooperate with the FTC; that is, it shall not evade, obstruct or refuse investigations by the FTC.
2.    If during an investigation the party concerned has undertaken specific measures to remove the purported illegal acts, the FTC can terminate its investigation in order to save administrative expenses.
(IV).Penalties and Administrative Remedies
1.    Refusal to cooperate with an investigation by the FTC will be met with an increased fine.
2.    The new act also provides that decisions by the FTC will no longer be subject to appeals (or petitions); anyone wishing to appeal from such decisions can directly invoke administrative litigation. With respect to petition cases pending before the implementation of the new act, they will be pursuant to the Administrative Appeal Act until they are completely dealt with.