Newsletter
CD-R TECHNOLOGY OWNERS CLEARED OF FTA VIOLATIONS
A number of Taiwanese businesses filed a com-plaint against Philips, Sony, and Taiyo Yuden, alleging that the three companies, being busi-nesses in a horizontal competitive relationship, had jointly determined the level of technology licensing royalties; had, through joint licensing, obtained a monopoly position in the Taiwanese market for patented technology for CD-R re-cordable optical discs; and had improperly maintained the level of licensing royalties. These actions had violated the prohibitions under the Fair Trade Act (FTA) against concerted ac-tions and abuse of monopoly status.
After investigating the complaints, the Fair Trade Commission (FTC) determined that the three companies had indeed engaged in con-certed actions in violation of the FTA. Accord-ingly, on 20 January 2001 the FTC imposed administrative fines of NT$8 million, NT$4 million, and NT$2 million on Philips, Sony, and Taiyo Yuden respectively, and ordered them to cease their unlawful actions within two days af-ter receiving notice of the FTC's decisions. The three companies did not accept the FTC's deci-sions and immediately filed administrative ap-peals, which were followed by administrative suits against the appeal decisions. After seven years of legal proceedings, in mid-April 2007 the Supreme Administrative Court rendered judg-ments in favor of the three companies, finally bringing the case to an end.
In its judgments, the Supreme Administrative Court stated that Article 14 of the FTA provides that for enterprises to be held to have engaged in concerted actions, there must be a competitive relationship between them. If the goods or ser-vices supplied by each enterprise have different and independent functionalities, so that they are not substitutable, then the enterprises cannot be described as being in a competitive relationship. If the goods or services are not substitutable, but the enterprises nevertheless engage in concerted actions, it is not possible for them to perform the unlawful acts of jointly determining prices or restricting quantities, and thus their actions will not impact trading counterparts' opportunities to trade, nor will they affect the orderly conduct of trade.
The Court found that the patents owned by Phil-ips, Sony and Taiyo Yuden did indeed cover technology indispensable for the production of CD-R optical discs, and that the companies held a monopoly position in the market for CD-R op-tical disc technology. But the companies' pat-ented technologies conforming to the "Orange Book" standard specification were complemen-tary in nature, and therefore the companies were not in a competitive relationship. On this basis, the Court found that the three companies had not violated the FTA's prohibition on concerted ac-tions. The Court's finding of facts also differed from that of the original FTC decisions. Ac-cordingly, the Court set aside the original FTC decisions and administrative appeal decisions, and referred the case back to the FTC for recon-sideration.
At the time of going to press, the FTC had not yet decided whether to render new decisions in the case, or to dismiss the case without rendering new decisions.