5. Article 20(ii) of the Fair Trade Act prohibits enterprises from "treating another enterprise discriminatively without justification." What constitutes "justification" for discriminatory treatment?
Article 20 of this Act provides that "no enterprise shall have any of the following acts which is likely to restrain competition." Among the acts listed is "treating another enterprise discriminatively without justification (Article 20(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 20(ii), of this Act:
- 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.
- 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.
- Transaction amount: For instance, where a manufacturer offers discounts for purchases with large quantity or value.
- Credit risk: For instance, where a manufacturer offers a better price or payment terms to long-time customers or customers with better credit ratings.
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.
In determine whether the discrimination mentioned in the preceding paragraph is likely to restrain competition, the totality of such factors as the intent, purposes, and market position of the parties, the structure of the market to which they belong, the characteristics of the goods or services, and the impact that carrying out such restrictions would have on market competition shall be considered.
Relevant article(s) of law: Fair Trade Act, Article 20; Enforcement Rules of Fair Trade Act, Article 26