Investigation Techniques in Asian
Developed Economies: TFTC
Presented to
Group Training Course on Competition Law and Policy Jointly
Hosted by the JFTC and JICA
By
Angie Ying-Ju CHEN, Inspector
Department of Service Industry Competition
Taiwan Fair Trade Commission (www.ftc.gov.tw)
At the Headquarter of the JFTC, Tokyo, Japan
13:30-16:00, September 4, 2014
＊The views expressed here are the speaker’s alone and not necessarily those of Taiwan Fair Trade Commission
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I. Outline
Introduction
Rules Governing Hard-core Cartels
Tools for Investigating Hard-Core Cartels
Sanctions vis-à-vis Hard-Core Cartels
Statistics Pertaining to Regulations on Cartels
Case Resolution with or without the Leniency
Difficulties Encountered in the Investigation
Challenges
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I. IntroductionThe top enforcement priority is hard-core cartels. The administrative
penalties imposed on companies that breach the competition law have
been the most significant one among all kinds of restricted competition
cases.
The leniency program was adopted in November 2011.
Reasons for implementing the leniency program：
 Links to international experiences- The leniency policy proves
very successful in fighting cartels, along with the other detection
and investigation tools.
 Participating in the ICN cartel workshops has been one of the most
important sources for the Commission to grasp the international
experiences related to the leniency program.
 Peer pressure- Following the recommendations by the OECD
Competition Committee, 2006
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II. Rules Governing Hard-Cord
CartelsArticle 7 of the Fair Trade Law: Definition of concerted
actions
• The term "concerted action" as used in this Act means the conduct
of any enterprise, by means of contract, agreement or any other
form of mutual understanding, with any other competing enterprise,
to jointly determine the price of goods or services, or to limit the
terms of quantity, technology, products, facilities, trading
counterparts, or trading territory with respect to such goods and
services, etc., and thereby to restrict each other's business activities.
• The term "concerted action" as used in the preceding paragraph is
limited to horizontal concerted action at the same production
and/or marketing stage which would affect the market function of
production, trade in goods, or supply and demand of services.
Could the the board of the trade association request its members
to set the price at the suggested rate?
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II. Rules Governing Hard-Cord
Cartels (cont.) Article 14 of the Law:
 Prohibition of concerted actions： No enterprise shall
have any concerted action
 Exceptions for concerted actions：Unless the concerted
action that meets one of the following requirements is
beneficial to the economy as a whole and in the public
interest, and the application with the central competent
authority for such concerted action has been approved.
Cases approved: joint R&D
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III. Tools for Investigating Hard-Core CartelsBefore
Before the 2011 amendment of the Law:

1.
2.
3.
Article 27 of the Law:
In conducting investigations under this Law, the agency may
proceed in accordance with the following procedures:
to notify the parties and any related third party to appear to make
statements;
to notify relevant agencies, organizations, enterprises, or
individuals to submit books and records, documents, and any
other necessary materials or exhibits, and
to dispatch personnel for any necessary on-site inspection of the
office, place of business, or other locations of the relevant
organization or enterprises.
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III. Tools for Investigating Hard-Core CartelsBefore (cont.)
Deficiencies of investigating hard-core cartels
before 2011：
 Investigators do have the right to request that
interviewees provide facts-related materials, but they do
not have the right to proceed with a raid, search or other
judicial investigation.
 Tools for investigating cartels are similar to those for
other types of cases, e.g. abuse dominance, concerted
actions and unfair competition cases
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III. Tools for Investigating Hard-Core CartelsAfter
After November 2011: The agency may grant a reduction of or
exemption from administrative penalties to be imposed in violation of
Article 14 of the Law
 Creating the legal basis: Paragraph 2 of Article 35-1 of the Law: the
agency may grant reduction of or exemption from fines to be
imposed in accordance with Article 41 on enterprises in violation of
Article 14 but meeting one of the following conditions:
1. The enterprise files a complaint or informs the agency in writing about
the concrete illegal conduct of the concerted action in which it has
partaken and also submits the evidence and assists the investigation
before the agency is aware of the said illegal conduct or initiated an
investigation in accordance with this Law.
2. The enterprise reveals the concrete illegal conduct as well as submits the
evidence and assists the investigation during the period in which the
agency investigates the said illegal conduct in accordance with this
Law.
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III. Tools for Investigating Hard-Core CartelsAfter (cont.)
Enacting the settlement procedure:
 Article 6 of the “Regulations on Immunity and Reduction of
Fines in Illegal Concerted Action Cases”
1. True and correct information： The information and evidence
provided must be of significant help in the Commission’s
investigation on the concerted action in question or able to enhance
the probative value of the evidence the agency has already obtained.
2. Full and continuous cooperation：The enterprise shall follow the
instructions of the agency and provide prompt description or
cooperation to help the investigation on related facts capable of
proving the existence of the concerted action in question.
3. If necessary, the enterprise must allow its staff or representatives
having participated in activities related to the cartel in question to be
questioned by the agency.
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IV. Sanctions vis-à-vis Hard-Core CartelsBefore
Sanctions were insignificant and were limited by the
statutory cap under Article 41 of the Law before the 2011
amendment of the Law:
 For the first violation:
• NT$25,000,000> Administrative fines >NT$50,000
• approx. between US$833,333 and US$1,666
 For a repeated offence:
• Less than 3 years imprisonment
• A criminal fine less than NT$100,000,000
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IV. Sanctions vis-à-vis Hard-Core CartelsAfter
The Leniency Program Introduced in November 2011
Amendment:
 Immunity and Reduction of Surcharges
 Immunity of Surcharges:
 For the 1st Applicant
 The Evidence provided shall allow the Commission to initiate a
cartel investigation
 Reduction of Surcharges: in the period of investigation
 1st applicant: -100%
 2nd applicant: -30%~50%
 3rd applicant: -20%~30%
 4th applicant: -20%~10%
 5th applicant: -10%
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IV. Sanctions vis-à-vis Hard-Core CartelsAfter (cont.)
Sanctions on cartel members are based on the turnover
after November 2011
 Paragraph 2 and 3, Article 41:
The Commission may impose an administrative fine of
up to 10 percent of the total sales of the violators
involved in any form of horizontal agreement
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V. Case without Leniency ProgramThe agency learned on October 4, 2011 from the press report and questioned
by the legislators that 4 major CVS chain stores (7-11, Family Mart, Hi-Life,
OK) colluding to increase the menu prices of all kinds of milk coffee due to an
increase in the price of fresh milk within the same week of October 2011.
The agency initiated the investigation：
 Interviewed with the trade association
 On-spot interviewing
 requested the 4 CVS to provide documents
 requested the 4 CVS to be interviewed in the agency
 Collected market data
 Market survey on chain-store café
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V. Case without Leniency Program (cont.)Facts findings：
 Market structure and other factors:
• High density of stores: more than 8,500 stores in 36,006 square
kilometers
• No price competition between different stores at different location
• Low-price strategy: much cheaper than those sold in modern café or
bistro
• Sales of coffee is not the main part of total sales
• Self-brand
• Take-out coffee
• Simultaneously provide light food, snacks, drinks, daily supplies and
offer ATM, fax, Kiosk services
• The prices of coffee offered by other café stayed constantly
• Latte is one of the most popular coffee, and the fresh milk is the major
part of its ingredient
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V. Case without Leniency Program (cont.)Fact findings: similarities of 4CVS
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V. Case without Leniency Program (cont.)7-11
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V. Case without Leniency Program (cont.)Family Mart
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V. Case without Leniency Program (cont.)Hi-Life
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V. Case without Leniency Program (cont.)OK Cafe
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V. Case without Leniency Program (cont.)-
market share
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2
3
4
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V. Case without Leniency Program (cont.)Facts findings：
 Price making decisions of the 4CVS:
• Cost push
• Different cost structures of the 4 CVS
• FamilyMart, which was not the leading firm, announced to the press about the
price increase decision first
• Up-stream suppliers of fresh milk plan to raise the prices of the milk at the
same time, but at different rates
• 4 CVS never adjusted the price of take-out coffee before
• The prices of fresh milk was not historical high
• Internal meetings showed that some of the CVS decided to raise coffee prices
when the cost of milk still under negotiation
• FamilyMart (October 4), 7-11 and HiLife (October 5), and OK Mart (October
6) all raised the price of coffee during the first week of October
• Each raised the price of a cup containing milk, no matter the size, by 5 NT
dollars (approx. US20 cents)
• Total sales quantities after raising prices kept constantly, because the increase
in the consumption of coffee without milk
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V. Case without Leniency Program (cont.)Grounds for Disposition:
 Demonstrating the density, accessibility, and 24-hour operation, the 4 CVS
had engendered a high degree of reliance among consumers, and are
dominant in the take-out coffee market
 The price for all 48 coffee containing milk – whether a small hot latte
containing a larger amount of milk, a large iced latte containing less milk,
or other coffee products such as cappuccino, mocha, caramel macchiato,
regardless of size or recipe – was raised by NT$5 per serving.
 4 CVS all offered subsequent promotional activities after price rising to
keep customers in.
 The uniform price adjustment showed that the 4 CVS would rather to
earning less than taking advantage from competition. Accordingly, 7-11
was ordered to pay a fine of NT$16 million, FamilyMart NT$2.5 million,
HiLife NT$1 million, and OK Mart NT$500,000. Total penalties for 4 CVS
chain stores were NT$20,000,000 (US$666,666)
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V. Case without Leniency Program (cont.) “Coffee Clause”
 When the Commission decided to fine four major
convenience chain stores NT$20 million in total for
colluding to increase the prices of milk coffee, at the
same time, the legislators ratified the Commission’s
proposed amendment to raise the maximum possible
fines for hard-core cartels to 10 percent of the turnover,
and to introduce the leniency program into the Law.
 The penalties on 7-11 was coincidently equal to its one
day revenue of selling coffee.
 “Coffee Clause” indicates that the severe punishment
can provide cartel members with the incentives to apply
the leniency treatment and can deter such violations.
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VI. Difficulties Encountered in the
Investigation (cont.) Cultural problems:
Cooperation is with higher value than
competition
Cartel members tend not to betray the
competitors
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VI. Difficulties Encountered in the
Investigation (cont.)
Cultural problems:
 Respect for white-collar people:
 Most suspected cartel cases have been treated like white-collar
crimes. Companies or individuals with well-educated may
have been associated with wealthy or influential backgrounds
so that they are able to gain the sympathy from the public
easily.
 When these connections do exist, they often not only ensure
the favorable treatment of the individuals involved, but also
make it possible for laws to be drafted or for resources to be
allocated or shifted to ensure that such crimes are not defined
or enforced too strictly.
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V. Challenges and Chances
To learn from the international competition
community
To build the capacity of cartel investigations with
lenient treatment
To introduce additional tools – search and seizure
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Thank you.
www.ftc.gov.tw
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