Article 19 of this Law provides that “no enterprise shall have any of the following acts which is likely to lessen competition or to impede fair competition.” Among the acts listed is “treating another enterprise discriminatively without justification (Article 19[ii]).”

According to Article 26 of the Enforcement Rules, the following factors shall be taken into consideration in determining whether justification exists as referred to in Article 19(ii), of this Law:

1. Supply and demand situation of the relevant market: For instance, where a manufacturer offers special discounts for seasonal or perishable products towards the end of a season or before the products being removed from the market place, in order to clear the inventory or to move products quickly.
2. Cost difference: For instance, where a manufacturer offers different discounts or terms of sale because of differences in costs, such as transport, packaging, and marketing costs.
3. Transaction amount: For instance, where a manufacturer offers discounts for purchases with large quantity or value.
4. Credit risk: For instance, where a manufacturer offers a better price or payment terms to long-time customers or customers with better credit ratings.
5. Other reasonable grounds: For instance, a manufacturer, due to public interest, offers lower prices to charitable institutions; or the manufacturer offers differential treatment to its trading counterpart based on their previous cooperation practices.

Relevant article of law: Fair Trade Law, Article 19; Enforcement Rules of the Fair Trade Law, Article 26

The term discriminatory practices in Article 19(ii) of the Law refers to enterprises giving discriminatory treatments to other enterprises without legitimate reasons. Thus, if an enterprise has legitimate reasons for its discriminatory practices, this article is not applicable. Under Article 26 of the Enforcement Rules to the Fair Trade Law, factors that should be taken into account when determining the presence of legitimate reasons are market supply and demand; cost differences; transaction amounts; credit risk; and other reasonable causes. When banks offer different lending rates, fees, or exchange rates to customers with different credit ratings basing upon factors such as the customers’ financial conditions, business operation and management, and industry characteristics and prospects, such extension of different terms and conditions of trading can generally be seen as falling under the scope of “legitimate reasons” in Article 26(1)(iv) of the Enforcement Rules to the Fair Trade Law, therefore the discriminatory treatment is not necessarily in violation of this Law. In actual cases, however, the applicability of the Law to specific acts should still be determined on a case-by-case basis.
Relevant articles of law: Fair Trade Law, Article 19; Enforcement Rules to the Fair Trade Law, Article 26

When an enterprise offers different prices or discounts to the different sales tiers or sales outlet based on the market supply and demand situation, cost differences, amount of the respective sales, credit risk, or other reasonable or justifiable cause, such actions are deemed normal in the market pricing mechanism, and shall not constitute the discriminatory treatment as referred to Article 19(ii) of this Law.
Relevant articles of law: Fair Trade Law, Article 19; Enforcement Rules to the Fair Trade Law, Article 26

Whether enterprises that conduct promotional campaigns such as gifts-with-purchase, gift giveaways, and raffles are in violation of Article 19(iii) of this Law must be determined on the basis of whether the substance of the campaign is of such a degree as can be deemed inducement with interest causing trading counterpart(s) of its competitors to conduct a transaction with such enterprise. ”

To facilitate effective handling of cases involving suspected unfair competition under Article 19(iii), the Commission has formulated Guidelines in Handling Promotional Campaigns by the Fair Trade Commission. The guidelines may be summarized as follows:

1. The maximum value of the gift items accompanying the products sold by an enterprise is as follows:
1. For products valued more than NT$100, the gift item shall not exceed one-half the value of the product.
2. For products valued less than NT$100, the gift item shall not exceed NT$50.
2. When an enterprise awards promotional prizes, the maximum annual total amount of the promotional prizes shall be limited as follows:
1. For enterprises whose annual sales revenue for the previous fiscal year is not less than NT$1 billion, the limit is NT$200 million.
2. For enterprises whose annual sales revenue for the previous fiscal year is not less than NT$250 million, but not more than one NT$1 billion, the limit is one-fifth of the sales revenue.
3. For enterprises whose annual sales revenue for the previous fiscal year is less than NT$250 million, the limit is NT$50 million.
3. The amount of the largest prize offered by an enterprise shall not exceed 120 times the minimum monthly wage as announced by the Council of Labor Affairs, Taiwan.
4. If an enterprise, when offering complementary items with its products or giving away prizes, violates the preceding provisions, such acts shall constitute a violation of Article 19(iii) of this Law.

1. The acts regulated by Article 19(vi) can generally cover tie-in sales, exclusive trading arrangements, restrictions on sales territories or customers, restrictions on use, and other restrictions on business activities of trading counterparts.
2. The following factors shall be considered when determining whether such acts are proper:
1. Intent and purpose of the parties: whether an enterprise is using the restrictions on the business activities of the trading counterpart such as the tie-in sales arrangements or exclusive trading arrangements for purposes of restricting competition or unfair competition.
2. The standing of the parties in the market to which they belong and the structure of that market: Does the market tend toward a monopolistic or oligopolistic structure? If it is a freely competitive market, does the enterprise occupy a dominant position, or is it a minor competitor? Generally speaking, the more concentrated the market (i.e. the more it tends toward monopoly or oligopoly conditions), the more likely such acts constitute a violation on the part of the enterprises. Likewise in terms of market structure, the less, and the less active, the brand competition in the market, the greater the likelihood such acts will be considered a violation.
3. Product characteristics: At times, the characteristics of goods themselves can have a bearing on the effect of trading restrictions on a market. For instance, if an enterprise that is party to an exclusive trading arrangement is a vendor of convenience goods, low unit cost goods, or goods with little consumer brand loyalty such as stationary goods or daily necessities, the resultant restraint on competition will be greater than if the enterprise is a vendor of durable commodities such as cars or household appliances.
4. Impact on market competition: Because exclusive trading arrangements and similar restrictions are fairly commonplace in Taiwan, and because such arrangements do not always have an adverse effect on market competition, one factor weighed in judging whether an act constitutes a violation is the degree of effect on market competition after the arrangement is put into practice.

Relevant articles of law: Fair Trade Law, Article 19; Enforcement Rules to the Fair Trade Law, Article 27

 

Basically, the sole and exclusive agent agreements among enterprises are covered under Article 19(vi), which forbids imposing improper restrictions on its trading counterparts business activities as a condition of transacting business with them. Not all sole and exclusive agent agreements, however, are illegal. The legality of such agreements will depend on upon the intention and purpose of the parties concerned, the market structure, product characteristics, the manner by which the agreement is executed, and the effect on market competition.
Relevant articles of law: Fair Trade Law, Article 19; Enforcement Rules to the Fair Trade Law, Article 26

1. In determining whether "tie-in sale" is in violation of this Law, the following factors may be taken into consideration:
   (i) There is a presence of at least two distinguishable products (or services):
   When analyzing any contract for tie-in sale, the first step is to determine the presence of two distinguishable products (or services). The following factors can be considered to determine whether the two products (or services) are distinguishable:
   a. The normal trade practices within relevant sectors;
   b. Whether there is remaining value in the products (or services) if the two are separated;
   c. Whether there is a cost saving if the two products (or services) are packaged and sold together;
   d. Whether the seller designates different prices for the two products (or services);
   e. Whether the seller had previously sold the two products (or services) separately;
   f. There should be explicit or implied requirement agreement that the buyer can not freely choose whether to purchase the product and the tie-in product simultaneously from the seller.
   (ii) There should be explicit or implied requirement agreement that the buyer cannot freely choose whether to purchase the product and the tie-in product simultaneously from the seller.
2. To determine whether a tie-in sale is in violation of this Law, the following factors should be considered:
   (i) The seller should have a certain degree of market power in the tie-in products: In the determination of a tie-in sale, whether the seller has a certain market power in the market of the tie-in products is a major factor for consideration. If the seller does not possess sufficient market power, it will be difficult for him to promote the tie-in sale program. Should the seller be able to do so without possessing sufficient market power, his adverse influence on the market competition will also be minimal.
   (ii) Whether there is concern of obstructing the market of the tie-in products: When there is concern that the act of tie-in sale will obstruct fair competition in the market, such as where the market of product tie-in for sale will suffer a certain degree, volume, or ratio of exclusion effect, such act will be considered unlawful.
   (iii) Whether there is due cause: Acts to ensure the business reputation and product quality of the seller, or to protect the intellectual property rights of the product creator, may be considered as having due cause, and will be permitted

Relevant articles of law: Fair Trade Law, Article 19; Enforcement Rules to the Fair Trade Law, Article 27