Unilateral Conduct
Dr. SUN Lih-Chyun
Commissioner , Taiwan Fair Trade Commission
3 October, 2012
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Three Pillars of Antitrust Law
Merger
Cartel
Unilateral
Conduct
• Ex-ante regulation
• Substantial lessening of competition test
• Ex-post regulation
• Hard core cartel is treated as per se illegal.
• Ex-post regulation
• Concerns in the unilateral conduct cases
Which firms shall be subject to antitrust law ?
What are abuse of dominance/ monopoly? 2
Which firms should be subject to
unilateral conduct rules
– Substantial Market Power
Market power in economic literature
In practice, almost all firms have some degree of
market power and are able to raise price above
short-run marginal cost (OECD, Techniques and Evidentiary
Issues in Proving Dominance/Monopoly Power,2006)
Different concepts and language to identify
which firms shall be subject to unilateral
conduct provisions.
Substantial market
Dominance- TFEU § 102 （EU） power is required
Monopoly- The Sherman Act §2 （USA）
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Evidence of Dominance and
Monopoly Power
Indirect evidence
Market Share – beginning of analyzing the
market power (High Market Share ≠ Substantial
Market Power)
In some jurisdictions, such as Germany, Korea and
Taiwan, there are rebuttable presumption provisions of
dominance/monopoly power.
Entry Barriers：sunk cost；distribution outlets
；regulatory environment；the cost of operating
at the minimum viable scale
Buyer Power
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Evidence of Dominance and
Monopoly Power
Direct evidence
Form-based
approach to
Effect-based
Approach ？
Estimating Demand Elasticities
Performance – Profitability
Performance – Pricing
Conduct & Anticompetitive Effects :
Inferences of market power should not be drawn
from conduct alone
Some agencies recognized that anticompetitive
effects could be sufficient evidence to establish that
a firm has substantial market power
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What are abuse of dominance/
monopoly?
Profit Sacrifice Test
Unilateral conduct would be unlawful if short
run profit sacrifice is irrational without its
tendency to eliminate or reduce competition in
the longer run
No Economic Sense Test
Unilateral conduct would be unlawful if it
makes no economic sense apart from its
tendency to eliminate or reduce competition
Ref. OECD, Refusals to deal ,2009
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What are abuse of dominance/
monopoly?
Equally Efficient Firm Test
Unilateral conduct is considered harmful to
competition if it would be likely to exclude rivals
that are at least as efficient as the dominant firm
Consumer Welfare Balancing Test
Unilateral conduct is not unlawful unless there is a
tendency for dominant firm to reduce consumer
welfare by raising prices and lowering output
Disproportionality Test (Ref. USDOJ, Single Firm Conduct
under Section 2 of the Sherman Act , 2008)
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Unilateral Conduct rules
in Taiwan
Definition of Monopolistic Enterprise
Fair Trade Act § 5
Any enterprise that faces no competition or has a
dominant position to enable it to exclude competition in a
relevant market.
Recognition of joint dominance
Two or more enterprises shall be deemed monopolistic
enterprises if they do not in fact engage in price
competition with each other and they as a whole have the
same status as the enterprise defined in the provisions of
the preceding paragraph.
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Unilateral Conduct rules
in Taiwan
Factors for consideration
Enforcement Rules to the Fair Trade Act § 3
the market share of the enterprise in a particular market;
the possibility of substitution of the goods or services
amidst changes in a particular market, giving regard to
considerations of time and place;
the ability of the enterprise to influence prices in a
particular market;
whether formidable difficulties exist to entry to a
particular market by other enterprises;
Import and export status of the goods or services.
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Unilateral Conduct rules
in Taiwan
Rebuttable presumption of Monopolistic
Enterprise – market share threshold
Fair Trade Act § 5-1I : an enterprise shall not be
deemed a monopolistic enterprise if none of the
following circumstances exists:
the market share of the enterprise in a relevant market
reaches one-half;
the combined market share of two enterprises in a relevant
market reaches two-thirds
the combined market share of three enterprises in a
relevant market reaches three-fourths.
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Unilateral Conduct rules
in Taiwan
Safe harbor
Fair Trade Act § 5 -1 II
Enterprise shall not be deemed as a monopolistic
enterprise
where the market share of any individual enterprise does not
reach one-tenth of the relevant market
where its total sales in the preceding fiscal year are less than
one billion New Taiwan Dollars (approximate 34 million
USD), such enterprise shall not be deemed as a monopolistic
enterprise.
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Unilateral Conduct rules
in Taiwan
Exception
Fair Trade Act § 5-1III
An enterprise doesn’t meet criteria of the FTA 5-1I&II
may still be deemed a monopolistic enterprise if the
establishment of such enterprise or any of the goods or
services supplied by such enterprise to a relevant
market is subject to legal or technological restraints,
or any other circumstance so as to enable itself to
exclude competition.
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Unilateral Conduct rules
in Taiwan
Prohibited conducts
Fair Trade Act § 10 : No monopolistic enterprises shall:
directly or indirectly prevent any other enterprises from
competing by unfair means;
improperly set, maintain or change the price for goods or
the remuneration for services;
make a trading counterpart give preferential treatment
without justification; or
otherwise abuse its market power.
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Statistics:
Unilateral Conduct cases
Table 1 Decisions for FTC Self-initiated Investigations Case －by Practices violating the FTA
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Statistics:
Unilateral Conduct cases
Table 2 Complaints Subject to Decision Ruling by Practices violating the FTA
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Unilateral Conduct cases
-Taiwan’s Experience
The Great Taipei Gas
1990
• Monopoly power resulted from legal restraints
• Setting gas price improperly
CPC Corporation
1990
• Monopoly power resulted from legal restraints.
• Refusal to deal so as to exclude competition
CPC Corporation
1992
• Market share was 89.15% + ability of setting
price over liquefied petroleum gas (LGP)
• Price discrimination and refusal to deal with
distributors
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Unilateral Conduct cases
-Taiwan’s Experience
Over-the-Counter
Securities Exchange
2002
• Monopoly power resulted from legal restraints
• Setting service price improperly to gain
excessive profit
Taiwan Stock
• Monopoly power resulted from legal restraints
Exchange Corporation • Setting service price improperly to gain
excessive profit
2002
Trade-Van Information • Market share was 91%+ market characteristics
Services Co.
(network externality and two-sided market )
• Loyalty discounts so as to exclude competition
2005
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Unilateral Conduct cases
-Taiwan’s Experience
2001
Philips Electronics
Sony Corporation
Taiyo-Yuden
2002
(Joint dominance)
•Monopoly power resulted from legal restraints
(patent) + No substitution
•Maintaining CD-R price improperly + refusal to
provide important trading information + price fixing
The Petition and Appeals Committee revoked the decision in 2002
• After further investigation, the TFTC still
decided that Philips and other two companies
infringed the FTA
The High Count overturned the decision in 2003.
2009
•Monopoly power resulted from legal restraints
(patent) + No substitution
•Maintaining CD-R price improperly + refusal to
provide important trading information
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Unilateral Conduct by nondominant/monopolistic firm
The FTA § 19 No 1、3、6 enterprise shall have
any of the following acts which is likely to lessen
competition or to impede fair competition:
Boycott
Discrimination
Unlawful restraint of trade
Tying
Exclusive dealing
Restriction of territory, customer, fields of use…
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Thank you for listening
http://www.ftc.gov.tw
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