Fair Trade Commission Imposed Heavy Fine against Philips on Account of Abuse of Dominant Market Position.

In conclusion of a 5-year investigation, the Fair Trade Commission (FTC) finds Philips in violation of the Fair Trade Act for abusing its dominant position in the CD-R technology licensing market.  The FTC determines Philips has improperly required licensees to produce a detailed list of their manufacturing equipment and a sales report thereby obtaining access to the proprietary business information of other suppliers to the detriment of fair trade order.  Philips is to pay NTD6 million in penalties for said unfair practice.

 

This is the second time the FTC imposed penalty upon Philips.  On the previous case, the FTC imposed a fine of NTD million against Philips for the concerted licensing practice of Philips, Sony and Taiyo Yuden.  Sony and Taiyo Yuden were imposed a fine of NTD4 million and NTD2 million respectively in that case.

 

According to the FTC, as far as the licensing market is concerned, the technologies needed for making CD-R discs are incorporated in the Orange Book, the CD-R standards jointly established by Philips and Sony.  That is, any local CD-R discs maker wishing to make compliant CD-R discs must obtain patent licensing from Philips.  However, Philips also sells CD-R discs on the market.  That is to say, Philips and its licensees are in fact competitors in the CD-R discs market.

 

Philips requires by operation of the licensing agreement that the licensee produce a detailed list of its manufacturing equipment and a written sales report.  Such information involves, among others, important proprietary information relating to the production capacity efficiency, production output, customers’ information, value of accounts, and operating cost of the licensee and none of such information is necessary as far as the calculation of the payable royalty amount is concerned.

 

The FTC thus finds that Philips has abused its dominant position in the licensing transaction in the course of negotiating the CD-R technologies licensing agreement with the prospective licensee to get hold of important information about the licensee’s operating cost.  The FTC concludes that such practice results in unfair competition among Phillips and the licensees in the CD-R discs market at the cost of fair trade order.  The FTC accordingly orders Philip to immediately cease the improper practice and pay NTD6 million in penalties.  (2006.04)

/EMA