Fair Trade Law

The Fair Trade Law (FTL) is primarily aimed at preventing activities that restrain trade and other acts of unfair competition, so as to protect the free market system and legitimate business activities, and seeks to create equilibrium between the maintenance of orderly transactions and the protection of the rights and interests of consumers. The provisions of the FTL regulate conduct that constitutes, for example, monopolies, combinations and concerted actions as well as other commonly occurring conduct that can be deemed to be unfair competition. Formosa Transnational handles all types of FTL matters, including the following:


a.Monopolistic Actions

The main purpose of Article 10 of the FTL is to prohibit entities from abusing monopoly positions. However, the FTL does not prohibit entities from gaining or maintaining monopoly positions. Formosa Transnational acts for clients by reporting possible abusive monopolistic business conduct of others to the Fair Trade Commission (FTC) as well as representing clients that have been accused of abusing monopoly positions as well as having been investigated for purported abusive monopolistic acts. FT prepares and files submissions and arguments before the FTC regarding such conduct that is under scrutiny.

b.Combination Actions

Combination actions refer to acquisitions and mergers that are specifically defined by Article 6 of the FTL, and which are frequently utilized by businesses. According to Articles 11, 12 and 13 of the FTL, combination actions are not prohibited. However, if a combination results in any of the circumstances identified at Article 11 of the FTL, then the business entity must apply to the FTC for permission to carry out the combination. Currently, when a combination application is filed, the system allows for objections to such combination to be raised. If the restraint of competition resulting from the combination exceeds the expected overall economic benefit, the FTC may object to the combination action. Otherwise, in principle, if no objection is raised against the combination within the statutory period, the FTC may allow the combination.

Formosa Transnational frequently drafts applications to the FTC on behalf of domestic and foreign clients seeking to carry out combinations, and in connection with the same, prepares reports regarding the relevant general market conditions and addresses the factors that will impact the overall economy.

c.Concerted Actions

Pursuant Article 7 of the FTL, a concerted action is an act taken by multiple parties to restrict the activities of enterprises, such as entering into a contract, agreement or other form of mutual understanding with other enterprises with whom it competes in order to jointly determine the prices of goods or services or to restrict quantities, technology, products, equipment, trading counterparts or trading territories. The FTL normally prohibits concerted acts and permission for the same is only granted in exceptional circumstances. However, if the concerted action conforms to Article 14 of the FTL, and if the concerted action is beneficial to the overall economy and public interest, the FTC may grant special permission for the action.

Generally, acts taken by business competitors who have reached an agreement after negotiations will be deemed to be concerted actions. Thus, when clients conduct business negotiations, this firm counsels and advises them regarding the restrictions and limitations imposed on such contemplated actions by the FTL.

2.Unfair Competition

Article 18 of the FTL regulates acts deemed to be unfair competition and classifies unfair acts as either 1) conduct committed to impede fair competition, such as discriminating against another enterprise, or by the use of coercion, inducement with profit, or other improper means, causing trading counterpart(s) of competitors to transact business with itself or causing other enterprises to refrain from competing in price, or inducing others to take part in an illegitimate combination or concerted action and 2) dishonest conduct committed in bad faith to impede fair competition, including the use of an identical or similar name of a business establishment, or, any false, untrue or misleading representation likely to cause confusion among or mislead consumers regarding price and or quantity, or, to make or publicize any false statements likely to damage another's business reputation, or, multi-level sales and marketing.

Where conduct does not necessarily fall within these two classes, Article 24 of the FTL is a general prohibition against engaging in deceptive or obviously unfair conduct sufficient to affect the trading order. Of these acts, the issuance of demand/warning letters is the most commonly utilized method in connection with alleged infringement of intellectual property rights. The FTC has devised special rules and guidelines regarding warning letters as a standard for dealing with the abusive use of warning letters.

There are many types of commercial conduct, such as conduct required under distribution agreements or in connection with advertising, may constitute unfair competition in violation of the FTL. As such, careful consideration should be given when negotiating and drafting the terms and conditions of contracts in order to avoid possible FTL liability.

3.Formosa Transnational’s Services

The FTL is aimed at preserving the fundamental order of Taiwan’s free market economy. Formosa Transnational has experience in all types of FTL related cases and utilizes vision and professionalism in protecting clients’ economic interests and advising clients regarding conduct and compliance.