Approved by the 160th Commissioners' Meeting of November 2, 1994
Amended by the 417th Commissioners' Meeting of November 3, 1999
Circulated by Letter (88) Kung Fa Tzu No. 03182 of November 9, 1999

1. Purpose

These principles are formulated with a view toward stimulating efficient competition among small or medium-sized enterprises, upholding orderly transactions and the interests of consumers, and benefiting the economy and public interest.

2. Eligible Entities

The eligible entities shall be "small or medium-sized enterprises" referred to in Article 14(vii) of the Fair Trade Act. According to Article 22 of the Implementing Rules of the Fair Trade Act, "the small and medium-sized enterprises mentioned in Article 14(vii) of the [Fair Trade] Law shall be determined in accordance with the Statute for Development of Small and Medium-sized Enterprises."

3. Subject Matters

Concerted pricing activities of medium-sized or small enterprises (or setting of uniform prices by medium-sized or small enterprises) that are beneficial to the economy and public interest.

4. Legal Basis

Pursuant to Article 14(vii) of Fair Trade Act, enterprises shall apply to the Fair Trade Commission under the Executive Yuan (hereinafter referred to as the Fair Trade Commission) for permission "to take concerted action in order to improve the operational efficiency or strengthen the competitiveness of the small or medium-sized enterprises concerned."

5. Principles for Exemption

Since concerted pricing by small or medium-sized enterprises will restrict price competition, enterprises may apply to the Fair Trade Commission for approval only if their concerted pricing activities are beneficial to the economy and in conformity with one of the following principles:

(1) Principle of transaction stability. It is determined that the concerted pricing activities will be beneficial to public interest and development of the economy due to the facts that, in sporadic commodity or service transactions which are highly similar in nature and which involve small amounts of money, the transaction costs such as costs for inquiries (or negotiations) may be reduced; that competition in efficiency may be enhanced among suppliers of goods or services; and that unfair trading acts may be prevented where the trading counterparts are rushed into transactions and taken advantage of.

(2) Principle of information transparency. It is determined that the concerted pricing activities will be beneficial to public interest and development of the economy due to the facts that the purpose and effects of concerted pricing in commodity or service transactions are such that they do not affect supply and demand or current international pricing; that there are international market price as reference; or that the disclosure of such information as valuation method, valuation base, and relevant parameters, can facilitate the acquisition of trading information, lessen the social costs of transactions, and help create trading opportunities.

6. Application Requirements

(1) Small or medium-sized enterprises which are parties to concerted pricing action shall submit their concerted pricing proposals to the general meeting of the trade association of which they are members for approval and allow the trade association to apply for approval on their behalves.

(2) The said small or medium-sized enterprises shall allow their trade association to consult with the organization to which their trading counterparts belong, in order to reach a consensus on concerted pricing, reasonable prices and obtain a letter of consent.

(3) To enhance the efficiency of concerted pricing, the trade association representing the said small or medium-sized enterprises shall, when applying for approval on their behalves, propose a self-disciplinary code or implementing procedures that are consistent with the spirit of the Fair Trade Law.

7. Applicant

Small or medium-sized enterprises, which are parties to a concerted pricing action, shall, in the spirit of Article 12 of Implementing Rules to the Fair Trade Act, allow their trade association to apply for approval on their behalves and produce documents detailing the resolution by which the general meeting of their trade association consented to applying for approval on their behalves.

8. Application Procedures

(1) Preparatory Procedures

(i) If the small or medium-sized enterprises are convinced concerted pricing is in keeping with the aforementioned principles and beneficial to the economy and public interest, they shall submit their reasons in writing to the Fair Trade Commission for preliminary review.

(ii) If, through preliminary review, the Fair Trade Commission tentatively recognizes concerted pricing by the said medium-sized or small enterprises is in keeping with the aforementioned principles, the said small or medium-sized enterprises may apply for permission to request their trade association to apply on their behalves for approval for uniform prices. Prior to applying, the trade association shall consult with the organization representing the trading counterparts of the said medium-sized or small enterprises, in order to reach a consensus on concerted pricing activities and reasonable prices.

(2) Application Formalities and Documents Required

(i) After the Fair Trade Commission has approved a concerted pricing proposal in preliminary review and consulted with the organization representing the trading counterparts of the small or medium-sized enterprises which are parties to the concerted price action, the said small or medium-sized enterprises shall allow their trade association to apply to the Fair Trade Commission on their behalves.

(ii) Documents required: In addition to complying with Articles 13, 14 and 20 of the Implementing Rules of the Fair Trade Act, the applicant shall produce documents showing, eligibility to be considered as small or medium-sized enterprises; minutes of general meeting of the trade association which, by resolution, consents to applying for approval for concerted pricing on behalf of the said small or medium-sized enterprise; a list of uniform prices (or valuation formulae); reports testifying to compliance with the principles governing concerted pricing by medium-sized or small enterprises; records of consultations with the organization representing the trading counterparts of the said medium-sized or small enterprises; a letter of consent; the self-disciplinary code or implementing procedures prepared by the trade association representing the said small or medium-sized enterprises, and any other documents required by the Fair Trade Commission.

9. Criteria for Review

(1) Whether the organization representing the trading counterparts has been consulted and a consensus has been reached with it on concerted pricing.

(2) Whether concerted pricing in conformity with the principles of "transaction stability" and "information transparency."

(3) Whether the uniform prices resulting from concerted pricing are "reasonable prices."

(4) Whether concerted pricing is beneficial to the economy and public interest.

10. Procedures for Review

To keep pace with the applications of medium-sized and small enterprises, the Fair Trade Commission shall review their applications in two steps, namely preliminary review and final review.

(1) Preliminary Review:
Applications shall be reviewed to determine whether they are in conformity with the principles of "transaction stability" and "information transparency." Applications found incompatible with the two principles shall be rejected.

(2) Final Review:
Applications shall be processed through a review of essential formal conditions (examination of documents) and a review of essential substantive conditions. The review of essential substantive conditions may consist of public hearings or seminars attended by academics, specialists, organizations representing the trading counterparts, other relevant organizations, trade associations, target industries, and social and administrative authorities.

(i) Approval:
If after review, a concerted pricing case is found to be in conformity with the principles stated under Article 5 above and beneficial to the economy and public interest, approval shall be granted in accordance with Article 14(vii) of the Fair Trade Act, with or without attached conditions, restrictions, and undertakings.

(ii) Rejection:
Applications shall be rejected during review of essential formal conditions if the applicants fail to furnish the necessary documents or fail to make up for inadequacies. If an application for concerted pricing is found to be not in conformity with the principles stated under Article 5 above or not in compliance with the essential conditions stated in Article 14(vii) of the Fair Trade Act, the application shall be rejected.

11. Approved Exemptions for Concerted Pricing

In the event a case of concerted pricing is found to be in conformity with the principles stated under Article 5 above and beneficial to the overall economy and public interest, the reasonable price(s) advocated by the applicant shall be made the price ceiling (the applicant shall not ask that the price it advocates be made a uniform price applied to all members). In the event of special transactions, where fixed prices involve both buying and selling prices, or in the event the information transparency is called for, approval for setting both the maximum and minimum prices and for certain valuation methods may be granted. The approval date and expiration of approval shall be determined by the Fair Trade Commission on a case-by-case basis.

12. The review principles described herein shall become effective as of the date of approval, by resolution, by the Fair Trade Commission.

Notes:

(1) Resolution of the 195th Commissioners' Meeting: Concerted pricing by small and medium-sized enterprises as approved by the Fair Trade Commission shall be discretionary in nature. Failure by an approved small or medium-sized enterprise to abide by such pricing does not in itself violate the substance of the Fair Trade Commission's approval; however, whether it constitutes a violation of applicable provisions of the Fair Trade Act and the related regulations shall be determined on a case-by-case basis.

(2) Resolutions of the 187th Commissioners' Meeting:
(i) A Qualified Land Registration Agent is an "enterprise" under Article 2(iv) of the Fair Trade Act and therefore is regulated by the Fair Trade Act. Article 22 of the Implementing Rules to the Fair Trade Act provides, "The definition of a small or medium-sized enterprise as referred to in Article 14(vii) of the Law shall be in accordance with the criteria set forth in the Statute for the Development of Small and Medium-Sized Enterprises." Article 2(2) of the Statute for the Development of Small and Medium-Sized Enterprises differentiates between large enterprises and small and medium-sized enterprises based upon sector, capitalization, turnover, and total assets. A Qualified Land Registration Agent with annual turnover of NT$40 million can be deemed to be a small or medium-sized enterprise pursuant to Article 2(1)(iv) of the Criteria for Determination of Small and Medium-Sized Enterprises.
(ii) The trading counterparts of a Qualified Land Registration Agent should encompass associations such as consumer protection groups and commercial and industry associations in the construction and property development sector. (See Commission Letter dated 20 May 1995, Ref. (84) Kong Yi Tzu No. 3561.)

(3) Annex: A Schematized Representation of the Fair Trade Commission's Processing and Review Procedures for Exemptions of Concerted Pricing by Small and Medium-Sized Enterprises