On January 5, 2011, the Fair Trade Commission (Commission) found that Hocheng Corporation ("HCG"), a manufacturer of bathroom fixtures, has improperly restricted the resale price and business activities of its distributors, in violation of Article 18 and Article 19, Item 6 of the Fair Trade Act. The Commission has fined HCG NT$3 million and enjoined the company from further violations.

The Commission's investigations showed that for the retail sales of its products, HCG adopted a price policy that set the price and discounts at which its chief distributors sold to distributors. Under this policy, the purchase prices paid by the distributors were nearly identical, testimony to the effectiveness of HCG's price restrictions. As for sales related to construction projects, HCG required its chief distributors to report each deal, and to sell at a price approved by HCG. The Commission found that such conduct restricted the chief distributors' ability to set prices freely, thus reducing intra-brand competition and interfering in free market operation, and was in violation of Article 18 of the Fair Trade Act.

Besides price restrictions, HCG engaged in other conduct to restrict the ability of its distributors to compete for construction contracts amongst themselves, and to discourage cross-territory sales. The Commission determined that these are practices that limit trading counterparts' business activity improperly by means of the requirements of business engagement, and have the tendency to restrict or impair fair competition. Whether HCG was motivated by a desire to maintain its market power or to ensure the quality of its products, given HCG's market power and the structure of its industry, these practices impose geographical and customer resale restrictions on the company's trading counterparts and limit intra-brand competition. Accordingly, the Commission also found HCG in violation of Article 19, Item 6 of the Fair Trade Act.

The Commission imposed penalties after considering many factors, such as HCG's motivation, the company's operating conditions and market position, any benefits gained, and the level of disruptions to the trade order caused by the violations.