The Taipei High Administrative Court revoked the 20 million yuan fine imposed by the Fair Association and ruled in favor of Quanlian. (File photo)
[Reporter Weng Jingyou/Report from Taipei] After Quanlian Welfare Center acquired RT-Mart in 2022, it was reported that it violated the "no most favored customer policy" attached when the merger was approved by the Fairness Committee and was fined NT$20 million. Quanlian refused to accept it and filed an administrative lawsuit, claiming that the bargaining process was a normal business practice. The Fair Association believes that the price negotiation process between Quanlian and its suppliers is already a most-favored-customer policy. The Taipei High Administrative Court adopted the CFA’s argument and revoked the fair society’s ruling. Can be appealed.
The judgment pointed out that Quanlian declared a business combination to the Fair Council, and the Fair Council approved the merger in 2022 after attaching multiple burdens. The joint decision requires that Quanlian cannot arbitrarily increase the prices of goods in mass merchandisers and supermarkets unless suppliers increase prices. In addition, Quanlian is not allowed to adopt a "most favored customer policy", that is, using the selling prices of other channels as a bargaining chip to negotiate prices with suppliers. However, the Fair Council subsequently received a report alleging that Quanlian violated the joint decision at the time of the merger.
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After an investigation by the Fair Association, it was determined that Quanlian requires suppliers to apply for a certain discount for other channels when applying for new products to be put on shelves or to increase prices. If there is any discrepancy, the price should be reduced in the same proportion. In addition, during the promotion period, Quanlian used the pricing of other competitive channel products as the basis for bargaining with suppliers, negotiated with some suppliers to adjust the promotional price and purchase price, and even used this price to calculate the payment after unauthorized price reductions. A fine of 20 million yuan was issued on April 22, 2024.
Quanlian filed an administrative lawsuit, arguing that what the Fair Council prohibits is the use of contract coercion or other unfair means to restrict suppliers and other channels' pricing, but does not prohibit price visits, price comparisons and price negotiations in general commercial activities. Quanlian pointed out that after the joint decision, the relevant clauses have been deleted as required. Suppliers are still free to decide whether to accept the price conditions. Negotiating preferential prices between the two parties is a normal business practice and should not be interpreted as a most-favored customer policy.
The Fair Council believes that the purpose of combining burdens is to avoid excessive market power and harming the rights and interests of suppliers after the merger. Therefore, it not only requires the deletion of contract terms, but also prohibits the continued use of other channel prices as the basis for bargaining in practice. The Fair Association maintains that Quanlian still requires suppliers to ensure that the price is 20% off or 15% off that of other channels, and requires suppliers to provide more favorable prices through price interviews and price follow-ups. In essence, it is implementing the most favored customer policy.
The court held that Quanlian had deleted the most-favored customer clause, and the new product quotation, price adjustment agreement and other materials submitted by the Fair Conference could only prove the existence of bargaining behavior between the two parties, and it was difficult to conclude that Quanlian used its advantageous position to force the supplier to accept the conditions. The supplier's statement also shows that some suppliers may refuse to sign or refuse to negotiate again, indicating that they still retain the right to make decisions.
The court pointed out that even if Quanlian conducts price inquiries, follows up on prices, or adjusts prices midway during the promotion period, the joint decision itself does not prohibit such behavior, but rather prohibits forcing suppliers to cooperate through contracts or dominant positions. The Fair Council did not provide sufficient evidence to prove that Quanlian had completely passed on the promotional price difference to the suppliers, or had caused the restrictive competition effect it claimed. Therefore, it cannot be found to have violated the joint burden based solely on price visits and price negotiations.
The collegial panel determined that it was difficult to prove that Quanlian had adopted a most-favored-customer policy with the evidence presented by the Fair Society, so it revoked the NT$20 million fine imposed by the Fair Society and ruled in favor of Quanlian. Can be appealed.
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