Nikomart Convenient Store Co. Ltd.

Case:

The Supreme Administrative Court decision on Nikomart Convenient Store's objection to the 2005 Su-Geng-Yi-Tzu Judgment No. 93 of the Taipei High Administrative Court regarding to the store's violation of the Fair Trade Law; the Supreme Administrative Court, however, dismissed the store's appeal

Key Words:

additional charge, dependency, advantageous market position

Reference:

Supreme Administrative Court (96) Pan-Tzu No. 01938

Industry:

Retail Sale in General Merchandise Stores with Food, Beverages or Tobacco Predominating (4711)

Relevant Laws:

Article 24 of the Fair Trade Law

Summary:

1. The appellant of this case (Nikomart Convenient Store Co. Ltd.) was reported by the complainant to have utilized its market advantageous position in compelling additional fees from suppliers and signed the trading agreements with the complainant, known as the Supply-and-Marketing Contract, in which provide ambiguous standards and repeated collection of additional fees to retrieve products from the complainant, violated the Fair Trade Law. Results of the investigations by the appellee (Fair Trade Commission) showed that apart from demanding additional fees for "(Annual) Gratitude Party Sponsor Fund" upon opening up every 100th Nikomart convenient store, the appellant also repeatedly collected additional fees for "Sponsor Fund for New Store", an obvious unfair act which is sufficient to affect the market trading order and is in violation of Article 24 of the Fair Trade Law. In accordance with the forepart of Article 41 of the same law, the appellee disciplined the appellant by Disposition (90) Kung Ch'u Tzu No. 087. The appellant disagreed with the order and thus initiated an administrative litigation in accordance with the system after the court of first instance, in its judgment of (91) Su-Tzu No.2485 on October 7, 2003, struck down the original decision and original disposition. The appellee disagreed with such a judgment and appealed to the Supreme Administrative Court. In the court's judgment of (94) Pan-Tzu No. 542 on April 14, 2005, the court overruled the original judgment and remanded the case to the original court for re-trial. After the re-trial, the court rejected the appellant's claim. As the appellant disagreed with the court's decision, it applied for an appeal of the case.
2. The original judgment of this case was based on the facts that the complainant's product, "anti-cigarette herbal roll" (cigarette without nicotine), is not a well-known branded product and is not highly demanded by consumers. If the appellant did not trade with the complainant, the appellant might easily obtain substitutes for the said product from other cigarette suppliers. Consequently, if the complainant did not accept the appellant's contractual conditions, it would lose the opportunities to put the product in the market for selling it at more than 200 sales points nationwide. Furthermore, as "anti-cigarette herbal roll" is the complainant's star merchandise, the impact of losing more than 200 sales points on its operation would be enormous. Therefore, the complainant is heavily dependent on the appellant, and is weaker in terms of bargaining power on the market. In addition, the complainant's sales turnover in 1999 was around NT$ 51 million, the appellant's sales turnover in the same period reached over NT$ 3.6 billion. From the aspect of operation scale, the complainant has been no way near the appellant. Furthermore, the appellant and its chain convenient stores have control over contract execution and the act of retrieving products from the market and of putting products in the market. In comparison, the appellant has a more superior and advantageous market position. In the same way, irrespective of whether the newly established chain store is the 10th, 99th, or 100th chain store, for the complainant, the additional fees collected by the appellant for "Sponsor Fee for New Store" and "(Annual) Gratitude Party Sponsor Fund" upon the opening of the 100th Nikomart convenient store could only increase the sales quantity of one new chain store. Therefore, for the purpose of inducing sales of the product, the collected additional fees and the amount of the fees, which is to be collected, will not provide double benefits and thus the act of collecting the additional fee is neither proper nor reasonable. The original court's argument and reasoning in accordance with the evidence collected during the investigations show that should such an act not be ceased, such an act would continue to impact on other potential trading counterparts and cause damages to trading order on the marketplace. Therefore, the court agreed with the argument that the appellant's obvious unfair act in this case was sufficient to affect trading order, and at the same time rejected the appellant's allegations with respective to the contracts with other trading counterparts and its contention on the reasonableness of the contractual terms.
3. In conclusion, the original decision of the High Administrative Court and the original Disposition of the appellee shall be held. The court dismissed the appellant's appeal and considered it was groundless for the appellant to allege that the original judgment was inconsistent with applicable laws and it should be discarded. Accordingly, the court rejected the appellant's appeal.

Appendix:
Nikomart Convenient Store Co. Ltd.'s Uniform Invoice Number.: 22853777

Summarized by Lai,Chia-Ching; Supervised by Lee, Wen-Show