The Taiwan Fair Trade Commission (TFTC) continued to sharpen its legal tools in 2016 after amendments to the Fair Trade Act (FTA) took effect in February 2015. These amendments represent the most comprehensive overhaul of the FTA since the TFTC was established in 1992. Following this sweeping reform, the TFTC has been better equipped to maintain its independence and take enforcement action effectively against anticompetitive practices. In 2016, the TFTC imposed total fines of NT$205.95 million on 11 antitrust cases that mainly related to cartels and vertical restraints.
A more autonomous competition agency
Legislation regarding government restructuring in 2010 allowed the TFTC to become a statutory independent agency under the Executive Yuan in Taiwan. Echoing the reasoning of the Constitutional Court’s interpretation No. 613 on the purpose of independent agencies, the amendments in February 2015 provided the TFTC an additional degree of independence by insulating the competition authority’s decisions on violations of the FTA from political interference.
Before the amendments, the TFTC’s decisions were reviewed within a hierarchical administrative system and the TFTC could not appeal to the high administrative court when the Appeal and Petition Committee of the Executive Yuan revoked its decision. Now any concerned party can appeal the TFTC’s decision directly to the administrative court for judicial review, instead of appealing to the Executive Yuan. This change works to maintain the professionalism and credibility of the TFTC as an independent agency.
Adequate financial resources are also important for the TFTC’s independence. Taiwan lawmakers unanimously approved a new provision in the FTA in June 2015 to allow the TFTC to set up its own antitrust fund. The TFTC can allocate to the fund 30 per cent of total fines imposed. The fund can only be used for statutory purposes, including providing rewards for information on cartel activities as well as conducting competition advocacy activities.
In 2016, with support of the government budget and antitrust fund, the TFTC held a total of 88 advocacy events aimed at a range of different audiences, including college students, lawyers, judges, employees from the financial sector, distribution enterprises, real estate brokerage and automobile industries where anticompetitive practices were identified. The purpose of these advocacy activities was not only to increase public awareness but also promote compliance with competition law.
Tools for more effective and efficient cartel detection
Leniency policy and more appropriate sanctions system were adopted by the TFTC in 2011. Substantial sanctions against cartels are a key element to ensure a successful leniency programme. At the same time, a 100 per cent increase in maximum fines for anticompetitive conduct, as well as a potential turnover-based fine to certain aggravated cartels, both sent clear signals to cartel participants that they may avoid great economic loss if they come forward to report illegal activities.
Since the TFTC implemented its leniency programme in 2011, a number of cartel cases have been detected with the help of evidence provided by leniency applicants. It is worth noting that most of the investigations initiated by leniency applications have involved foreign companies. Price fixing among capacitor companies, which were fined by the TFTC in December 2015, is a good example to demonstrate the effectiveness of the leniency policy and cooperation with foreign counterparts against international cartels. This is the second case on which the TFTC levied turnover-based fines. It is also the second-highest fine imposed by the TFTC.
The TFTC has continued to initiate ex officio investigations and uncover more cartels in recent years. The increasing number of cartel cases may indicate that offering a reward to an informant is another effective tool to raise the probability of cartel detection in addition to the leniency policy. As mentioned above, the TFTC has been allowed to establish a fund to grant individual informants pecuniary rewards. The TFTC issued regulations on rewards for information about illegal concerted actions in October 2015. Soon after the regulations came into effect, the TFTC increased the maximum reward, according to a decision made by the Executive Yuan.
The new regulations were followed by the TFTC’s first case against collusion between container freight station operators. In May 2016, the TFTC imposed a fine of NT$72.6 million on 21 container freight station operators for engaging in illegal concerted action to collect facility fees for export goods. To date, three separate cartels have been successfully discovered as a result of information provided by individual whistle-blowers who were not involved in the illegal concerted actions.
A refined merger regime
The amendments to the FTA in February 2015 also brought two major changes to the merger control regime in Taiwan. First, in a merger case, any natural person who has controlling interest of an enterprise is deemed as an enterprise that is subject to the FTA. In other words, the revised merger regime closed the loophole where a natural person could avoid being captured by the regime. The second change means that the aggregated turnover of affiliated enterprises now needs to be considered when the TFTC determines whether a merger meets the turnover threshold or not.
In response to these changes, the TFTC increased domestic turnover thresholds in March 2015. For non-financial sectors, the new turnover threshold covers mergers where one of the parties has domestic turnover exceeding NT$15 billion and another merging party has domestic turnover exceeding NT$2 billion. For financial sectors, the new threshold covers mergers where one of the parties has domestic turnover exceeding NT$30 billion and another merging party has domestic turnover exceeding NT$2 billion.
In addition to current domestic thresholds, the TFTC proposed a standalone threshold including the global scale of the merging parties. This proposal was released to seek public opinions in September 2016, and was approved at the TFTC’s Commissioners’ meeting in late November 2016. This threshold requires a merger notification when in the preceding fiscal year, the combined global turnover of all merging parties exceeds NT$40 billion and the aggregated domestic turnover of each of at least two of the merging parties exceeds NT$2 billion.
In 2016, the TFTC reviewed 30 mergers across various industries, including cable television, the financial sector, IC packaging and testing, and the pharmaceutical industry. Of these mergers, the most high-profile transaction was the merger between Advanced Semiconductor Engineering (ASE) and Siliconware Precision Industries (SPIL). It is notable that ASE announced a hostile takeover attempt of SPIL and formally notified this takeover to the TFTC on 25 December 2015. At that time, this notification stirred up debate on whether a different approach to hostile takeover is necessary. The TFTC received a total of 7,077 comments on this merger in seven-day consultation period. Given that the hostile takeover could not be completed within the tender offer period, the TFTC terminated its review on this merger notification on 24 March 2016.
Subsequently, ASE and SPIL reached a consensus to set up a holding company to acquire 100 per cent of ASE and SPIL and filed the merger notification in July 2016. This new proposed merger was cleared by the TFTC on 16 November 2016 after a series of public hearings and consultations with other government agencies. Throughout this merger case, the TFTC worked closely with its foreign counterpart during the review period.
Stepping up international cooperation
Economic globalisation and advances in technologies have led to increasing numbers of anticompetitive practices and mergers that fall within the jurisdiction of two or more competition authorities. Accordingly, it has become more imperative for competition authorities, including the TFTC, to cooperate in order to effectively fight against international cartels and cross-border mergers.
The TFTC has signed memoranda of understanding or arrangements with eight countries to enhance cooperation on the application of competition laws. In addition to the capacitor cartel and ASE/SPIL cases, in 2016 the TFTC also exchanged information with competition authorities in EU, Korea and the United States on the Intel/Altera and Denali/EMC merger cases.
In other international work, the TFTC participates in international forums such as APEC, ICN and the OECD, and leads discussions in negotiation of competition chapters in a number of proposed trade-related agreements.
Going ahead in 2017
Consistent with the goal of the FTA, the TFTC will continue to safeguard competition around markets in Taiwan in 2017. In September 2016, the TFTC’s report submitted to the Economic Committee of the Legislative Yuan noted that the Commission may face new challenges in 2017. These challenges mainly relate to competition issues that arise from innovative business models in data-driven markets, of the sharing economy and for the ‘internet of things’.
In anticipation of these challenges, throughout 2016 the TFTC organised several internal training events to provide staff the latest developments on the digital economy and its implications for competition policy and enforcement. The TFTC will continue to arrange such in-house training to upgrade staff skills to enable them to cope with these evolving issues and delineate the scope of when the FTA may apply.
Four sitting commissioners including the chairman and vice chairman will not continue to serve when their terms expire in January 2017. Four nominees were approved by the Legislative Yuan in 20 December 2016. It will be the first time for the TFTC to be led by a chairperson with an economic background.