Distribution enterprises’ restriction on the locations of their suppliers would be regulated by the law from November 2003, said the Fair Trade Commission (FTC).

    The battle between SOGO and Breeze Center last year was one of the most significant events with department stores. The effect of this case was overwhelming, as FTC had punished SOGO with a fine for restricting its suppliers from setting up counters at the competitor’s department store located within few kilometers from SOGO. FTC yesterday has announced the Explanatory Notes to the Amendment to The Fair Trade Act concerning distribution enterprises. In the future, where a distribution enterprise improperly limits its suppliers' location or business activity will be liable for a fine at maximum of NT 50 millions.

Explanatory Notes to the Amendment to the Fair Trade Act concerning distribution enterprises is focusing on a distribution enterprise’s limiting its trading counterpart’s business activity by improper means or improper returns. Additionally, to bring the practices in line with the principles of openness and transparency, it is also requested in the amendment that any incidents of off-shelf, withdrawal, short supply, or return shall be negotiated with the trading counterparts, i.e. manufacturers, suppliers, counter stores, etc., settled in written form and exposed to the public of the relevant information.

New provisions regarding the improper returns in distribution enterprises are also further amended. Based on the current business situations in Taiwan, and the studies of relevant law practiced in Japan and Korea, the FTC has determined the following four acts as improper returns: 1. Where the return goods are polluted, defected, expired, and determined not to be trading counterparts’ responsibilities 2. Goods are returned where the enterprise has no just reasons to manage the stocks, or there is a shelf-reorganization or store reconstruction, 3. Where an enterprise purchases a great deal during promotion, but intends to return the unsold goods at normal prices without just reasons, 4. Where there are no just reasons given to the goods returns.

The FTC stressed that, no enterprise shall limit its trading counterparts by specializing the products being sold through certain distribution channels, in order to lessen competition or to impede fair competition, or otherwise will be charged in violation of Paragraph 6, Article 19 of Fair Trade Act. The responsible person be punished with a imprisonment of no more than two years, or in lieu thereof, the punishment may be commuted to a fine of NT 50 millions.