The front section of Article 15, Paragraph 1, of the Fair Trade Act (hereinafter “FTA”) prescribes that “No enterprise shall engage in any concerted action.”  The purpose of this prohibition is to prevent competing enterprises from restricting market competition through mutual agreement.  The elements to establish Concerted Action include: 1) multiple enterprises sharing horizontal competitive relationship, 2) there is a contract, consensus or other means of agreement, 3) the agreement between businesses is in the determination of restricting business activities with respect to the price of goods or services, supply, technology, products, equipment, trading parties, and/or trading areas, and 4) such agreement is “capable of” influencing the market function of production, transaction, or service supply and demand.

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From the above elements, the threshold to hold a business liable for engaging in Concerted Action is merely that the subject action is “capable of” influencing production, transaction, or the market supply and demand.  But, the interpretation of “capable of” is disputed.  First, some argue that given the nature of such agreements, the existence of any agreement would necessarily be “capable of” influencing market function.  Others believe that, to satisfy the “capable of” requirement, the agreement between enterprises must have the potential to harm consumer choice/opportunity.  Still others believe that the agreement between enterprises, to be “capable of” influencing market function, must have some meaningful influence, such that trading parties are denied same or substitutable alternatives from other horizontally-competing enterprises.

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On September 6, 2018, the Supreme Administrative Court issued judgment 107 Pan-Zi No. 511, holding that: “the so-called ‘capable of’ requirement is satisfy as long as there is a joint behavior between enterprises which, objectively speaking, have the potential to influence the market function of supply and demand.  Actual influence is not required.  Further, considerations such as whether the agreement is legally-binding, whether the agreement was executed, or whether the agreement is meant to increase profit, are irrelevant. The standard for anti-competition regulation to apply to Concerted Action merely requires the potential to influence.”

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The aforesaid Supreme Administrative Court judgment indicates that, to establish Concerted Action, the potential to influence is sufficient.  Actual influence is not required.  But, the Supreme Administrative Court did not provide further commentary on the standard to determine -or the correct interpretation of- what is “capable of potential influence” to the market function of supply and demand.  Consequently, it is expected that the Supreme Administrative Court may provide further analysis on this issue.  Given the court’s failure to provide a specific interpretation of what is “capable of potential influence,” perhaps enterprise-defendants in future litigation may persuade the court to adopt a more favorable interpretation.

(Author: Ke Ho, Associate of Formosan Brothers Attorneys-at-Law)

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