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シニアパートナー郭雨嵐弁護士及びアソシエイトパートナー汪家倩弁護士が書いたIP Blog第二期：Watch Before Shaking Hands in IP Transaction - New Game Rule of Antitrust Cases

Watch Before Shaking Hands in IP Transaction - New Game Rule of Antitrust Cases

Yulan Kuo,
Attorney at Law
Senior Partner
yulan.kuo@taiwanlaw.com

Jane Wang,
Attorney at Law
Associate Partner
jane.wang@taiwanlaw.com

On January 22, 2015, the Legislative Yuan (the Congress) passed the amendment of the Fair Competition Law (the Anti-trust Law), which revised 70% of the current Fair Competition Law in Taiwan. The amendment passed by the congress (the “Amendment”) has become effective on February 4, 2015 (revisions regarding merger threshold effective on March 6, 2015). As antitrust issue should always be thought of in IP transactions, M&A, and other business activities, both foreign and domestic players in the Taiwan market shall keep an eye on the Amendment for sake of legal compliance and for purpose of mitigating legal risks of its business.

The main points of the Amendment:

1. Merger:

The shares held by and the sales of the affiliates, including brother companies, shall be included in the calculation of the threshold of prior application.

2. Concerted action (Cartel):

(1) The “agreement” of cartel can be presumed to be existed after considering the market status, the characteristics of the goods or service, the cost, the profit, the reasonable economic concerns, among others. This means the burden of proof will be shift to the companies who are accused of concerted action if the “agreement” of concerted action is presumed to be existed.

(2) The types of concerted actions that can be approved are broadened. Current Fair Competition Law only provides limited types of concerted actions that can be approved, while the Amendment says as long as the concerted action is beneficial to the macro economy and public interest, it is eligible to file for Fair Trade Commission’s approval.

3. Investigation:

The investigation of anti-trust cases can be stopped. This is to encourage the companies involved to stop or amend any illegal action proactively so as to eliminate the damage to the market order.

4. Penalty:

Penalty for cartel can be up to NT$100,000,000 (approximately US$3.3million) or up to 1/10 of the company’s turnover in the previous year if the case is serious. Certain penalties are doubled. The statutory limitation for administrative punishment is extended from 3 years to 5 years. If the illegal action is conducted by trade association or groups alike, the members of such association of group can be published also.

5. Appeal:

Appeal against Fair Trade Commission’s decision shall be submitted to the courts rather than to the administrative authority. In the draft of the Amendment, Fair Trade Commission would like to have the power and authority of search and detention, but the relevant articles are deleted in the final Amendment.

For IP practice, the greatest impact would be the possible presumption of the “agreement” of cartel and the huge penalty and criminal sanction followed. A presumed agreement means the companies have to defend themselves by proving non-existence of said agreement, which is a difficult task for all companies involved. The companies under investigation would be required to submit piles of documents to explain the rationality of its business decision. For example, if two or more companies adjust the pricing of their goods almost at the same time, even if the reason for price-raising is because of the price-raising of raw-materials, the companies may have to defend themselves by explaining more than that. Setting a regular internal business strategy meeting would be helpful for explaining the independent business decision. Another example is that if you are to close a deal of IP transaction, the parties should be carefully phrasing the wording in the transactional documents and communications so as to avoid issues of cartel and even to establish evidence of the non-existence of cartel.

Another impact is that the threshold and calculation basis of merger changes. Companies have to review the M&A deals according to the latest laws and regulations.

As this is the most significant change to the anti-trust law in Taiwan in the decades, all players must be aware of the development and the practice thereafter.