Newsletter
SOLE SUPPLY OF BY -PRODUCTS TO SUBSIDIARY MAY VIOLATE FAIR TRADE LAW
The Administrative Court recently ruled that by entering into a long-term supply contract with its subsidiary and terminating the supply of by-product scrap materials to former customers who are in competition with the subsidiary, China Steel has engaged in acts of monopolizing the market for such raw materials and other violations of fair trade. The Administrative Court then ordered the Fair Trade Commission (FTC) to take appropriate action in the case.
Based on the grounds that it temporarily did not have surplus scrap materials for outside sales, China Steel refused to supply them to former customers. Former customers then filed a complaint with the FTC alleging a violation of Paragraph 2 of Article 19 of the Fair Trade Law (FTL) on the grounds that China Steel gives discriminatory treatment to another enterprise without proper or justifiable cause. After an investigation, the FTC found that China Steel's refusal to trade could not be inferred to have had an inappropriate purpose. The FTC, therefore, found that China Steel had not committed a violation of the FTL.
The Administrative Court did not agree with the FTC and pointed out that China Steel is Taiwan's only supplier of the raw materials in question and thus holds a unique position in the market. Its sudden termination of supply to factories and transfer of the entire supply to a subsidiary would force former customers into becoming distributors of China Steel's subsidiary. In addition, the termination of supply wiped out some of the former customers from market competition entirely. Whether China Steel had the intent to abuse its superior position to assist the subsidiary in eliminating competitors was a matter worth reconsideration by the FTC.