Supreme Administrative Court rules that Core Pacific Group Development and Investment Co., Ltd. violated the Fair Trade Law

Taiwan

Case:

Supreme Administrative Court rules that Core Pacific Group Development and Investment Co., Ltd. violated the Fair Trade Law

Key Words:

direct or indirect controlling relationship, affiliated enterprises, Core Pacific Group Development and Investment

Reference:

Supreme Administrative Court Judgment (90) P'an Tzu No. 791

Industry:

Finance and Investment (6294)

Relevant Laws:

Articles 6 and 11 of the Fair Trade Law

Summary:

1. Case Background

The complainant that made the motion for the re-trial, Core Pacific Group Development and Investment Co., Ltd. (the complainant) and its parent group were found to have, at the 21 July 1994 BES Engineering Corp. (BES) shareholders meeting and elections for BES directors and supervisors, arranged to fill four of the seven board of directors seats with representatives of Core Pacific Group affiliated enterprises: Yao Zhe-sheng of Jing Zheng Industrial Co., Ltd.; and Chou Ts'ai-fa, Su Chien-chung and Chen Yu-kai of Fan Yang Enterprise Co., Ltd.. This result gives the Core Pacific Group a majority on the BES board and a direct or indirect controlling relationship in BES that meets the definition of a merger of enterprises as provided in Article 6(1)(v) of the Fair Trade Law (FTL).

At the time of these actions by the complainant, BES sales for the previous accounting year had reached the NT$2 billion annual turnover amount set in the public announcement issued by the defendant the Fair Trade Commission (FTC), as the threshold triggering the mandatory filing requirement for combining enterprises. The complainant failed to file the mandatory application for merger with the FTC, thus violating the provisions of Article 11(1)(iii) of the FTL. The FTC subsequently imposed a fine of NT$1 million against the complainant in accordance with the provisions of Article 40 of the FTL.

The complainant objected to the fine and duly initiated administrative litigation proceedings. In 1999, Supreme Administrative Court decision P'an Tzu No. 3541 ("the original decision") dismissed the administrative suit. The complainant then filed the motion for retrial, claiming that grounds for a retrial existed under pre-amendment Article 28(i) of the Law of Administrative Proceedings (corresponding to current Article 273(1)(i) of same law, post-amendment).

2. The judgment of the Supreme Administrative Court held as follows:

"Obvious erroneous application of laws and regulations" as specified in pre-amendment Article 28(i) of the Law of Administrative Proceedings as grounds for a retrial refers to a contradiction between the laws and regulations cited as grounds in the original decision and any other existing laws and regulations that should actually have been applied to the particular case, or to a contradiction between such cited laws and regulations and binding interpretations or precedents.

Although the complainant argued that legal opinion diverged as to the proper application of laws and regulations at issue, the complainant did not succeed in establishing its case that the law had been incorrectly or erroneously applied

The complainant and its parent group were found to have, at the 21 July 1994 BES Engineering Corp. (BES) shareholders meeting and elections for BES directors and supervisors, arranged to fill four of the seven board of directors seats with representatives of Core Pacific Group affiliated enterprises: Yao Zhe-sheng of Jing Zheng Industrial Co., Ltd.; and Chou Ts'ai-fa, Su Chien-chung and Chen Yu-kai of Fan Yang Enterprise Co., Ltd.. This fact gives the Core Pacific Group a majority on the BES board and a direct or indirect controlling relationship in BES that meets the definition of a merger of enterprises as provided in Article 6(1)(v) of the FTL.

At the time of the actions by the complainant, BES sales for the preceding fiscal year had reached the NT$2 billion annual turnover amount set in the public announcement issued by the defendant, the FTC, as the threshold triggering the mandatory filing requirement for combining enterprises. The complainant failed to file the mandatory application for merger with the FTC, thus violating the provisions of Article 11(1)(iii) of the Fair Trade Law. The FTC subsequently imposed a fine of NT$1 million against the complainant in accordance with the provisions of Article 40 of the FTL.

The complainant objected to the fine and initiated administrative litigation proceedings. In 1999, Supreme Administrative Court decision P'an Tzu No. 3541 ("the original decision") dismissed the appeal. No contradiction can be seen between the laws and regulations cited as grounds in the original decision and any other existing laws and regulations that should actually have been applied to the particular case, or between the cited laws and regulations and any binding interpretations or precedents. Therefore, no grounds for a retrial of the original decision exist under pre-amendment Article 28(i) of the Law of Administrative Proceedings.

The complainant first denied that it has controlled a 12 % equity stake in BES and further refuted that a 12% equity stake could control BES, maintaining that the Ministry of Economic Affairs controls a 20% equity stake in BES and that the company's chairman is an appointee of the Ministry. The complainant maintained that due to these reasons, Article 6(1)(v) of the FTL should not be applied to the facts of this case. These arguments, however, are merely a divergent legal opinion held solely by the complainant. They had already been made during the previous administrative litigation proceedings and the original decision had delivered detailed reasons for rejecting them. Despite the complainant's continued assertions in this regard, no incorrect or erroneous application of the law in the original decision that would provide grounds for a retrial. The Supreme Administrative Court therefore dismissed the motion for a retrial.

Core Pacific Group Development and Investment Co., Ltd.'s Uniform Invoice Number: 01075324

Appendix:

Summarized by Lai, Chia-Ching;

Supervised by Chen, Shih-Fang