Newsletter
NEW FTC RULES FOR DE-PARTMENT STORES
At a meeting on 3 June 2004, the Fair Trade Commission (FTC) passed certain draft Guide-lines for Handling Trade Practices between De-partment Stores and Brand Counter Operators under the Fair Trade Act. The Guidelines will govern the FTC's handling of fair trade cases involving department stores and counters op-erators selling branded goods within the de-partment stores.
The Guidelines are aimed to rectify deceptive or obviously unfair conduct by which department stores may take advantage of their stronger market position to improperly restrict brand counter operators' trading behavior. The draft includes detailed explanations of various forms of deceptive or obviously unfair conduct, and the conduct that restricts competition or impedes fair competition.
Practices that will be considered as deceptive or obviously unfair conduct include a department store's failure to specify, in its agreement with a brand counter operator, reasons for not renewing the agreement, reasons for relocating the counter, rates of sharing the cost of promotional activities, the percentage of the counter operator's turnover payable to the department store, the ratio for sharing the burden of transaction charges for consumers' credit card payments, matters con-cerning decor, and methods of information dis-closure. Practices that will be regarded as re-stricting competition or impeding fair competi-tion include a department store's (1) seeking by proposal, encouragement, or coercion to cause a brand counter operator to break off trade with another enterprise in order to avoid having its counter closed down, thereby impeding its par-ticipation in competition; and (2) through uni-laterally imposed unfair trading conditions, re-stricting the geographical extent of a brand counter operator's business, in an attempt to impede potential competitors' participation in competition by creating a barrier to entry.
The draft also provides that non-compliance with the Guidelines will be investigated by the FTC to determine, according to the specific facts of the case, whether a violation of Article 19 Subpara-graphs 1 or 6 or Article 24 of the Fair Trade Act has taken place.