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How can your firm protect itself against antitrust conduct in Australia and Taiwan?

  • Insights 2019/05/10

By Harry Bechmann and Wan-Chen Juan

 

In this ever-changing world of finance and business, firms need to be aware of the changing laws that govern their marketing and business conducts when doing business overseas in a western or Asian trading nations such as Australia and Taiwan.

 

It is the responsibility of every firm doing business in either Taiwan or Australia to seek legal advice if not sure of the legal responsibility when trading, entering into business partnerships and starting up a new business venture and the consequences of doing so. Failure to obtain proper legal advice may have negative consequences if not properly advised of all the pitfalls and traps of doing business in a foreign country.

 

For Taiwanese companies wishing to do business in Australia

 

The Competition and Consumer Act 2010 (“CCA”) regulates and promotes competition and fair trading in the market and ensures the rights of consumers against anti-competitive behaviours.

 

Regarding the CCA regulation on the market

 

Restrictive Trade Practices:

  • Price-fixing between companies
  • Misuse of market power to exclude competitors
  • Boycotts for excluding other competitors
  • Exclusive dealing – to interfere with buyers right of choice
  • Resale price maintenance – fixing prices below that of a reseller
  • Mergers and acquisitions

 

The CCA allows Australian Competition and Consumer Commission to grant immunity from prosecution regarding certain anti-competitive conducts when prior notification and approval of the practice is given and the anti-competitive market practice is found to be beneficial to the public. However, such exemptions do not apply to the resale price maintenance or the misuse of market power.

 

It is important to note that the prosecutors may still peruse a case which an exemption is given because the Commonwealth Director of Public Prosecutions has the discretion.

 

Safeguards under the CCA

 

Section 51 (1) of the CCA permits a conduct that is normally unacceptable if covered by another Commonwealth, State or Territory Legislation permitting such conduct.

 

Criminal conduct regarding a cartel 

 

Currently Section 45AF making it an offence for any corporation who enters into a contract or arrangement encompassing a cartel provision.

 

The penalty for the offence is contained in section 45AF (3) (1) of the CCA, that is, a fine on the corporation not exceeding the sum of $AUD 10 million. The court in its discretion may impose a fine three times the value of the prohibited value on the violating corporation. If a figure cannot be determined, the court may determine the fine to be 10% of the corporation's annual turnover in the period of the offence took place.

 

Section 45AF (1) (b). establishes the fault element for the offence of knowledge or belief. Chapter 2 of the Criminal Code Act 1995 – sets out the elements for establishing criminal responsibility.

 

Misuse of Market Power now relies on the "effects test", that is, a corporation uses its market power and the effects or likely effects of that substantially lessen the competition of its competitor by unfair means.

 

For Australian companies wishing to do business in Taiwan

 

The Taiwan Fair Trade Act ("FTA") was first introduced and came into effect on 4 February 1991. The legislative purpose of the FTA is to maintain trading order, protect consumer interests, ensure free and fair competition and promote economic stability and prosperity.

 

The Fair Trade Commission ("FTC") has made some major reforms since 2016 and is now better equipped to deal with anti-trust practices. This sweeping change of the FTA legislation makes the Taiwanese antitrust legal system maintain its own independence and may take enforcement action together with other authorities. In 2016, the FTC imposed fines on firms totalling NT$205 million in 11 antitrust cases that were related to cartel activity.

 

Most recently, the FTC in 2017 found that US mobile technology company – Qualcomm Inc. to be in violation of FTA for manipulating its dominant position to enter into unfair contracts with local mobile phone vendors and contracts that bundled chip supply with patents and licensing agreements to the exclusion of its competitors. The FTC imposed a very serious fine on the company of NT$23.4 billion (US 774.5 million) for the violation.

 

Interestingly, the FTC warns domestic enterprises that not only will their activities be monitored internally by the relevant authorities in Taiwan, but more importantly, such enterprises shall pay attentions to similar investigations in other countries. To help domestic firms understand their international obligations when trading overseas the FTC has established a code of conduct that follows similar laws of other trading nations. Thereby reducing the risk of domestic enterprises violating those laws by their business activities overseas.

 

Investigation and sanctions

 

The FTC may upon receiving a complaint, investigate and take appropriate actions when a company engages in any anti-competitive behaviour in violation of the laws and cause harm to the public interests.

 

For example, in cases where the FTC finds that enterprises have violated the monopoly laws and fail to correct matters after an administrative fine has been imposed or commit a similar violation again, the enterprises may further face a criminal charge along with a fine of not more than NTD 100 million.

 

Taiwanese Leniency Program under the Fair Trade act

 

To strengthen its investigative powers against illegal concerted action cases, the FTC has adopted similar leniency programmes as that of the EU and the U.S.  The FTC may grant an exemption or give a fine reduction where an enterprise voluntarily comes forward and discloses that illegal conduct to the FTC before the FTC initiates an investigation to the unlawful cartel activity.

 

Only five enterprises under the leniency program may be eligible for a fine exemption or reduction. Here, the first applicant can be exempted from the fine. The second to the fifth applicant's fines will be reduced in order by 30% to 50%, 20% to 30%, 10% to 20% and 10%, respectfully.

 

More importantly, where an enterprise has coerced another enterprise to join into or fails to exit the cartel prohibition, it will not be eligible for a fine exemption or reduction.

 

Compliance with the FTC

 

Enterprises adopting a proactive and compliant approach with the FTC will avoid many of the problems as a matter of law.  Keeping transparent records of all business conducts relating to future price increase of goods and services, may avoid some mistakes enterprises may face when an investigation is initiated based on information given by a whistle-blower.

 

Making an application with the FTC before any suspicious antitrust conduct and providing a cost- analysis and justification, for example, for the need to increase the prices of the good or services, will go a long way forward to ensuring that your enterprise is in compliance with the local laws.

 

Brain Trust International Law Firm is able to provide competent legal advice on any matter you may have.

 

Author: Harry Bechmann

Counsel

Australia

+886-2-2707-9976
harry.bechmann@btlaw.com.tw

 

Editor: Wan-Chen Juan

Attorney

Taipei
+886-2-2707-9976

janie.juan@btlaw.com.tw