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All about fair trade? - Competition law in Taiwan and East Asian economic development.

The proliferation of antitrust laws around the world in the last three decades demands a series of inquiries, including what exactly are the nature and goals of these young competition statutes? Reviewing Taiwan's Fair Trade Law and the political economy informing its passage, this article reveals an infatuation, common in Asia, with "fairness." This article first traces traditional Chinese political thought about businesses and the offense of cornering public markets. It then summarizes post-World War II economic development and policies in Taiwan, including the relevancy of constitutional provisions and emergency economic legislation. It shows that Taiwan's Fair Trade Law was enacted amid economic liberalization and political and social reforms. The article then addresses the aim of promoting consumer welfare and other nonefficiency goals, concluding that Taiwan's experience, including how it has struggled to outgrow the fairness fever, has ramifications for other Asian economies following the development state model, including China.

KEY WORDS: Taiwan Fair Trade Law, fairness, Taiwan open trade policy, Chinese political thought.


The proliferation of antitrust laws (that is, competition laws) around the world in the last three decades demands a set of inquiries: What exactly are the basic nature and goals of these young competition statutes? In addition to restrained competition, should their antitrust analysis also address issues related to fair competition? Should they be, and are they indeed, guided by some notion of "fairness"--which may mean something other than efficiency and consumer welfare? How much political support will budding competition laws receive? Does it matter that, instead of working like judicial common law, competition laws in emerging markets tend to be more like administrative rules, and that bureaucrats could use them as if they were some new sort of industrial policy? What role does antitrust economics play in these young jurisdictions? Indeed, do competition laws mean the same thing in emerging markets as they do in developed jurisdictions?

To shed some light on these inquiries, I review for the first time the rich legislative history of the Fair Trade Law (FTL) of the Republic of China on Taiwan. In an attempt to understand the role of young competition laws in a development state in Asia, this article examines the political economy informing the FTL's passage. This scrutiny reveals art infatuation with "fairness"--as the title, text, tenet, and track record of the FTL strongly suggest--at the time Taiwan produced its competition laws and related institutions. And Taiwan's experience is not an isolated example. Elsewhere in Asia where the development state model prevails, indigenous competition laws share similar features and give rise to similar challenges. This has profound ramifications across Asia and for the world, as Asia becomes a more important contributor to global economic growth.

This article begins, in part II, with a snapshot of the FTL, which offers a brief description of its black-letter antitrust rules. Part III takes a step back and explores the scene before the enactment of the FTL, tracing the traditional Chinese attitude toward merchants and monopolies, and describing the offense against "cornering the (public) markets" as far back as the Tang Dynasty. It then goes on to summarize post-World War II economic development and policies in Taiwan, including the relevancy of constitutional provisions and emergency economic legislation. Part IV reviews the political economy behind the enactment of the FTL. It shows that the FTL's enactment involved both economic liberalization and political and social reforms. Gestation for this legislation has taken almost two decades, during which Taiwan was completely transformed. Part V of the article then examines how competition policy fares in the Asian development state, first by pondering whether Taiwan's open trade policy did more work than the FTL. This is followed by scrutinizing the claim to promote consumer welfare and other, nonefficiency goals. Competition laws in many other Asian jurisdictions are analyzed to reveal a similar pervasive infatuation with fairness. Part VI concludes that Taiwan's experience has ramifications for other parts of Asia--including China--and warns of the difficult task ahead for Asian antitrust enforcers and policy makers if the mandate in the competition law includes fairness-based goals.


A. Scope and goals

The FTL, enacted in 1991, and as amended, is two statutes in one: competition (or antitrust) law--which governs constraints on free competition and is the focus of this article--and unfair competition law. Enforced by Taiwan's Fair Trade Commission (TFTC), the FTL covers a wide range of antitrust rules: monopolies and oligopolies, abuse of dominant position, cartel legalization, merger control, a hodgepodge of rules including those against boycott, discrimination, "undue enticement," "coercion to join cartel activities," and vertical restraints, and a catch-all rule against unfair or deceptive methods of competition. (1)

The FTL contains three carve-outs that operate like exemptions. The first, a five-year exemption from enforcement given to state-owned enterprises (SOEs), expired in the mid-1990s and now has been repealed. (2) The second, similar to the "primary jurisdiction" doctrine for regulated industries, provides that if other laws govern competitive activities involving an enterprise, those other laws shall take precedence "insofar as they do not contravene the legislative goals of the Fair Trade Law." (3) The third, essentially a tautology, attempts to clarify that a proper exercise of rights under Taiwan's Copyright Law, Trademark Law, or Patent Law would not constitute a violation. (4)

Following Taiwanese legislative practice, the FTL specifies multiple goals: to maintain orderly trading conditions and consumer welfare, to ensure fair competition, and to foster the stability and prosperity of the economy. (5) Following German and European practice, the FTL's directives are addressed to "enterprises" (undertakings or Unternehmen) that provide or procure goods or services, including a government or public entity engaging in market activities, and trade associations. (6)

B. Monopoly regulation

The core provisions of the FTL deal with monopolies (including oligopolies) and abuse of dominant market position. The 1991 version contained an unusual provision requiring the publication of a list of monopolies and oligopolies, which was later repealed in 1999. (7) A monopoly is defined as an enterprise facing no competition or enjoying a dominant position in the relevant market or having the power to exclude competition. (8) If two enterprises do not in fact engage in price competition and face a situation described above, they are deemed joint monopolies, namely, oligopolies. (9) A set of important safe harbors, written in a roundabout way and following a structural, market share approach, supplements these definitions to contravene the finding of single-firm monopolies and two- and three-firm oligopoly. (10) Despite these safe harbor rules, a finding of monopoly or oligopoly can be made "if there are legal or technological barriers to entry or other conditions affecting the supply or demand in the relevant market so as to exclude competition.""

A monopoly or oligopoly enterprise may be abuse its dominant market position in several ways: first, use of unfair means to directly or indirectly prevent other enterprises from competing with it (12); second, improperly determining, maintaining, or changing the price of goods or services (13); and third, in the unusual case of a "monopsony," seeking preferential treatment without just cause. (14) Finally, a catchall clause makes sure other unenumerated means of monopolization are also unlawful. (15)

C. Cartel legalization

The FTL follows a two-pronged approach to regulating "concerted actions" by competing enterprises, namely, cartels. First, cartels can be approved upon application to the TFTC if they fall into one of the seven categories and meet the conditions set forth in the FTL and related rules. (16) Second, unless competing enterprises are also covered by an approval following this cartel legalization process, their joint activities will violate the FTL, thereby creating an unusual--and cumbersome--procedural rather than substantive per se rule.

The seven permissible cartel categories are standardization cartels, joint research and development cartels, specialization cartels, export cartels, import cartels, recession cartels, and small-business cartels. (17) Each category contains requirements for approval, such as improving efficiency and reducing cost. In addition, the approvals can be conditional and, unless renewed, may not exceed three years. (18) Publication of legalized cartels is required, and approvals may be modified or revoked if the circumstances surrounding them change. (19)

D. Merger control

"Combinations" of certain types (20) and sizes (21) are subject to the FTL's merger control provisions. The 1991 version of the FTL required definitive approval for each combination notified to the TFTC, but the 2002 amendment changed the clearance regime so that if the filing of the proposed combination does not result in a challenge by the TFTC generally within thirty days, then it is deemed cleared. (22) If the overall economic benefits of a combination outweigh the harm from restricting competition, it should be cleared. (23) To ensure this balance is achieved, the TFTC may impose conditions and restrictions on the proposed combination. (24) Failure to notify a qualified combination may result in breakup remedies. (25)

E. Vertical restraints and other forms of unfair competition

Chapter III of the FTL problematically throws various restraints, most of them vertical, along with other activities like passing off, trade libel, false advertising, theft of trade secrets, and operating a multilevel distribution scheme into one broad category labeled "unfair competition." (26) These restraints include resale price maintenance agreements, boycott, discriminatory treatment, unreasonable enticement or coercion to deal with another, unreasonable coercion or inducement to participate in a cartel, and any other unreasonable restriction of the business activities of another enterprise as a condition to deal with it. (27) Ending this chapter is an American transplant: a broadly worded rule against unfair methods of competition and deceptive practices modeled after section 5 of the Federal Trade Commission Act. (28)

F. Taiwan Fair Trade Commission and enforcement of the Fair Trade Law

The FTL and a companion law, the Organic Statute for the Fair Trade Commission (the Organic Statute), together entrust the primary responsibility of enforcing the FTL to the TFTC, which became a new ministerial-level agency of the central government in 1992. In addition to other powers granted to it under the FTL for subject-matter regulation, the TFTC has the power to proceed with administrative investigations, and the parties under investigation, as well as other parties in interest, may engage in document reviews, subject to certain safeguards, in order to defend themselves. (29)

The TFTC is composed of nine commissioners, including a chairperson and a vice chairperson, serving three-year terms with no term limits, who must have expertise in diverse fields such as law, business, economics, taxation, finance, and public or business administration. (30) They are nominated by the Premier and appointed by the President. (31) No more than half of the TFTC commissioners may come from the same political party, and each shall discharge his or her duty independently. (32)

Violations of the FTL may result in criminal sanctions of, for example, up to three years of imprisonment and a criminal fine of NT$100 million (about US$3.3 million) for abuse of dominant market position and illegal cartels. (33) Most acts of unfair vertical competition prohibited by Article 19 may be punishable by up to two years of imprisonment and a criminal fine of NT$50 million (about US$1.17 million). (34) As a result of the 1999 amendment to avoid frivolous criminal enforcement, criminal prosecution will occur only if a prior TFTC cease-and-desist order has been issued and ignored. (35) In addition to the criminal penalty, for each violation the TFTC may mete out administrative fines of up to NT$50 million. (36) The ceilings of these criminal and administrative fines in the 1991 version of the FTL were quite low and were substantially increased as a result of the 1999 amendment--in some cases one-hundredfold!

A violations of the FTL constitutes a wrongful act and may also lead to injunctions and civil liabilities to those injured, who with leave of court may claim damages that are up to triple the actual amount of injury. (37) As a restitution remedy, the court may also treat illegal windfall profits reaped by the violator as damages sustained by the victim. (38)


A. Traditional attitude

Political and economic thought as well as institutions in a particular culture may influence its view of the role of competition laws. China, from which Taiwan draws its tradition, always disliked private monopolies but, for millennia, was a sophisticated agrarian and light-industry economy superimposed by state monopolies of strategic sectors and rigid regulation. Organized government-run markets in urban and frontier areas where licensed tradesmen conducted business at aligned stalls go back thousands of years, although they were constantly subjected to "unfair" competition from unlicensed farmers and hawkers. (39)

Imperial China's antibusiness attitude suppressed the merchant class, viewing them as manipulative and monopolistic. During the Spring and Autumn Period (770 B.C. to 476 B.C.), before the First Emperor of Qin (221 B.C. to 201 B.C.), scholar-officials such as Guan Zhung had already warned the Prince of Qi of the threat to the throne, farmers, and small businessmen posed by "merchants owning thousands of gold bullion." (40) Emperor Wudi of the Han Dynasty (202 B.C. to 220 A.D.) prohibited businessmen from wearing silk or riding on horseback and subjected salt and iron production to government ownership for strategic reasons, (42) thereby suppressing capitalist tendencies. (42)

B. Tang Code against "cornering the market"

The Tang Dynasty (618 A.D. to 907 A.D.) saw the first codification in 737 A.D. of some form of competition policy--criminal prohibition of acts or practices designed to "corner the market." No person selling or buying goods was permitted to forcibly create a barrier against entry into the government-organized marketplace, fix the prices of goods he would buy or sell, or misrepresent the prices of such goods under pain of eighty floggings and mandatory disgorgement of the offender's illegal profits. (43) Bodde and Morris's analysis of the Hsin-an hui-lan, a famous collection of leading Qing Dynasty (1636 A.D. to 1912 A.D.) criminal cases, shows severe statutory punishment of those guilty of "cornering the market" (punishable by military exile under the Ming Dynasty criminal code), "improper trafficking of rice," violating quotas and prohibitions against arbitrage transactions policed by market-stabilizing supervisors, and the illegal purchases of grain coupons before setting up grain shops, thereby becoming "guilty of dishonest trading, monopolistic practices and fraud." (44) There was also evidence of the private enforcement of cartels. According to Mancur Olson, (45) toward the end of the Qing Dynasty (that is, at the turn of the 20th century), some Chinese guilds behaved like relentless cartels to enforce price fixing and output restrictions. Olson found, for example, that 123 fellow guild members reportedly bit a recalcitrant member-craftsman to death! (46) On the other hand, while the government tried to control prices at organized public markets and prohibited off-market transactions, archeological finds of ancient trading records at frontier markets suggest that a rather wide range of prices was allowed. (47)

A discourse on modern competition law cannot dwell too much on ancient history--and the historical background above was only a snippet. But this history may suggest a few thoughts that inform transplanted competition laws. First, competition laws may be culturally embedded and may mean different things in different societies. Second, defining the goals of competition law is more challenging when the government organizes (and epitomizes) the market and runs SOEs that compete with private businesses in a mixed economy. Third, old imperial governments would enforce laws rigorously if they could perhaps more from a desire to ensure political and social stability than from a highly developed sense of consumer welfare. Enforcement of draconian economic laws--even if only on paper--was no exception to this directive.

C. Constitutional principles in Taiwan affecting competition policy

Taiwan still follows the Republic of China Constitution adopted on the mainland in 1947 as a result of the political consultative conference held shortly before the outbreak of the civil war that led to the Nationalist (Kuomintang, or KMT) government's relocation to Taiwan. (48) This Constitution specifically provides for a charter of fundamental economic policies and social welfare. Several provisions are relevant--again, even if only on paper--to competition law and policy, as well as to the role of the state in the economy.

To begin with, Article 142 of the Constitution requires that the national economy shall follow the Principle for the People's Livelihood and shall constrain private capital so as to achieve both affluence and distributive justice. The Principle for the People's Livelihood is one of the Three Principles for the People conceived by the Republic of China's founding father Dr. Sun Yat-Sen. (49) It is generally believed that he borrowed the tenet of this principle from the mild socialism of the Fabian Society, with which he became acquainted while in the United Kingdom at the turn of the 20th century. In addition, Article 144 of the Constitution in general requires that public utilities and other enterprises that are natural monopolies be state-owned. (50) Moreover, pursuant to Article 145(1), if necessary to prevent unbalanced national economic development, the state may promulgate laws to constrain private wealth and private enterprises.

These constitutional directives suggest the same ambivalence toward competition policy as the foregoing account of economic regulation throughout Chinese history. Also, albeit counterintuitive, it is hard to pinpoint how these directives affected the adoption of the FTL. First, economic policies in budding nation-states are difficult to enforce even when they are enshrined in a constitution, because they are more the product of political and social vagaries. Second and more importantly, post-World War II Taiwan was under martial law and one-party authoritarian rule until 1987. Therefore, lofty constitutional directives were often perceived then as distant and irrelevant to daily state affairs. Third, specific texts embracing state ownership and constraining private capital might even suggest a negative attitude toward competition! But if competition laws were intended to control big businesses for political reasons, these constitutional mandates could be very convenient.

D. Post-World War II industrial policy in Taiwan

Taiwan's post-World War II economic development constitutes a part of the Asian growth miracle billed by the Asian Development Bank, and, by the early 1980s, Taiwan had become one of the "newly industrializing countries." (51) Taiwan's is a story of active government intervention to help boost the national economy. Between 1945 and 1952, when the ruling KMT party's government had just relocated from mainland China, Taiwan focused on rebuilding and protecting infant domestic industries through measures like foreign exchange controls and trade restrictions. During Taiwan's first import substitution phase from 1953 to 1960, it began to build light industries like textiles, cement, glass, fertilizers, food, plywood, motorcycles, home appliances, and plastic products through measures like relaxed foreign exchange controls, high tariffs, rebates of import duties, and restrictions on imports and setting up manufacturing facilities. During Taiwan's first export promotion phase from 1961 to 1972, the policy of encouraging light industry still continued, but the focus shifted to export promotion because of the saturation of Taiwan's domestic markets. The government also began to foster more technology and capital intensive sectors like man-made fiber, raw materials for plastics, steel, machinery, automobiles, and shipbuilding.

By the second import substitution phase from 1973 to 1984, Taiwan had shifted to the development of heavy industries--focusing on petrochemicals, steel, and shipbuilding, as well as infrastructure projects in order to head off the oil crisis. Economic liberalization became the focus during the period 1984-1990, when surplus-accumulating Taiwan had to open up its domestic economy as a result of pressures from deficit-suffering trading partners--the United States in particular. Information products became the focus of Taiwan industries and, reacting to massive appreciation of the New Taiwan Dollar, Taiwanese industries began to invest abroad.

From 1991 to 2000, Taiwan refined its focus on high-tech industries and allowed new entrants into most of its service sector. The previous century saw Taiwan joining the World Trade Organization, and the Taiwanese economy becoming more service industry-oriented, representing about seventy percent of its gross domestic product. The first decade of this century also saw Taiwan's ambivalent but massive engagement with China--first as a major manufacturing facility for Taiwan's listed companies, then as an increasingly lucrative market, and finally as a rapidly transforming--but still tightly controlled--society for various interactions that have profound cultural, economic, and geopolitical ramifications.

As far as competition law is concerned, the importance of Taiwan's industrial development lies in the concentrated domestic market structure and state owned--and even KMT owned--monopolies created by the industrial policy or domestic politics of the first half of Taiwan's post-War development and in the trade-led economic liberalization and adjustment during the second half of the Taiwan development story. As later discussions will show, the FTL is very much an integral part of this transition.

E. Post-War economic regulation in Taiwan

Before the FTL's enactment, Taiwan essentially relied on a trio of emergency wartime legislation to deal with market activities by private firms, reflecting an initially makeshift mentality toward economic liberalization and the rule of law. Because these laws were crude and plainly draconian and more concerned with price controls than, say, consumer welfare, they became more outdated over time and fell into disuse by the mid-1980s. But during the 1970s, when Taiwan was severely affected by two global oil crises, these laws--used more for moral suasion than for strict enforcement--somehow maintained their deterrent effect. (52)

One such piece of legislation was the National Mobilization Law (NML). Enacted in mainland China in 1942 during the Sino-Japanese War, but carried over to Taiwan by the KMT regime to assist in the prolonged civil war with Communist China, the NML sought to strengthen defense power by requisitioning and marshalling critical resources. The NML granted wide authority for government control of the sale and manufacture of "national mobilization materials," price and quantity control of goods, curtailment of labor strikes, and the regulation of commercial enterprises and export and import fees. A provisional criminal statute promulgated pursuant to Article 31 of the NML provided for severe penalties. (53)

Equally austere was the Law Governing Agricultural, Mining, Commercial, and Industrial Enterprises during the Extraordinary Period (LAMCI), enacted again in mainland China in 1938 and moderately amended in Taiwan in 1973, when Taiwan endured the first oil crisis. (54) LAMCI provided for discretionary treble fines--a rare feature seldom found in the laws of Taiwan or other East Asian economies even then--and up to five years of imprisonment for monopolization, manipulation, and speculative practices. An edict adopted in 1959 (the LAMCI Edict) further specified four types of illegal activity. The first category involved unilateral or collective acquisition or control of one or more businesses with the intent of monopolizing the market. Second, whether accomplished unilaterally or collusively and whether openly or secretly, it was punishable to fix the price of goods bought or sold with the intent to manipulate the domestic market. Third, it was similarly punishable (whether unilaterally or collusively and whether openly or secretly) to fix the output or standards or limit the geographical areas of goods bought or sold, with the intent to manipulate the domestic market. Fourth, it was similarly punishable to deal or not deal with counterparties with the intent to manipulate the domestic market. During the legislative hearings for the FTL bill in 1987, some commentators were critical of LAMCI and the LAMCI Edict as too outdated and vague to be adequately and properly enforced. However, textually this modern Taiwanese competition code reads much like the Sherman Act.

The third piece of draconian legislation during this period of austere economic regulation was the Statute for the Punishment of Violations of the Regulation of Foodstuffs. Enacted in 1946, just when Communist-led uprisings began in earnest in mainland China, and last amended in 1971 when the oil crisis hit Taiwan, it was an exercise in painfully straightforward and draconian proportionality: punishment was commensurate with the volume of foodstuffs stockpiled by the offender, with capital punishment being the maximum penalty! (55)

Despite these draconian laws, the KMT government for most of the 1970s and 1980s decided to use economic control, including the allowance of cartels, to modulate the domestic economy. The manufacturing sector was encouraged and monitored by the Industrial Development Bureau, and price controls and monitoring were under the charge of the Price Surveillance Council (PSC). Both were under the Ministry of Economic Affairs (MOEA). Staff at the PSC, a task force rather than a formal unit within the MOEA, became the backbone of the TFTC when it was formed in 1992.


The period from the FTL's initial drafting to its final passage (that is, from 1980 through 1992) coincided with the broad-based transition of Taiwan's political economy from hard to soft authoritarianism, then to a full-blown--and even cocky--democracy, from a state-dominant mixed economy to an open economy embracing global trade, and from a rigid and monolithic society to a civil, vibrant, and diverse society. The seeds of this transition were sown decades ago.

A. Concentration of domestic industries

By the 1980s, Taiwan's post-War industrial policy had led to both export promotion and concentration of the domestic market, a dichotomy creating increasing internal and external pressures for reform. A study by the Industrial Development Bureau in 1982, later recorded in the reports of the blue-ribbon Economic Reform Committee (ERC) in 1985, for example, shows that of 304 major products manufactured in Taiwan, 59.8% were manufactured in industries with concentrations (which in this study did not consider adjustments for imports and exports) of fewer than three dominant producers. (56) From the mid-1970s to the mid-1980s, high concentration of sales occurred in several industries enjoying import restrictions, such as cement (typically three firms enjoying over 60% market share), automobiles (two firms controlling more than 55% of the market in the mid-1980s), motorcycles (three firms controlling about 50% to 60% of the market in the mid-1980s), and various petrochemical products (mostly over 60% concentration by fewer than three firms). (57) Cartels of questionable legality, often involving daily necessities, widely existed--and were closely monitored by the PSC. Some of them were industry-organized joint export cartels, joint import cartels, and rationalization cartels that might pass muster under the cartel legalization regime of the FTL. (58)

The most notorious cartel case involved a glass oligopoly consisting of Taiwan Glass and Hsinchu Glass, which by the mid-1980s had about sixty percent and forty percent of the glass market in Taiwan between them. They notoriously got into the habit of jointly raising the price of glass and were shown in the PSC's record to have done so in 1976, 1977, and then again in 1983--just when the FTL bill was being drafted--for a whopping thirty-five percent price increase overall. They also dumped a glass product into the market in the early 1980s by halving its price, forcing the financially much weaker number three firm to exit the market. Each time the PSC used moral suasion to convince them to reduce prices, otherwise taking no formal enforcement action.

A well known securities fraud court judgment, collected in a well known securities law textbook in Taiwan, offers a glimpse of oligopolistic opportunism in the real world: In about 1983, two glass firms brazenly entered into a secret deal to split the Taiwan glass market between them fifty-seven percent-forty-three percent. But Taiwan Glass cheated and oversold its agreed quota, eventually droving Hsinchu Glass, a listed company, into bankruptcy. As part of the defense in this price war, the chairman of Hsinchu Glass first lied about the financial condition of his company so as to prop up the price of its shares and then brazenly sued to seek to enforce its cartel pact with Taiwan Glass! (59)

B. Reform since the 1980s

Despite constant challenges, from 1949 to 1980, through one-party autarchy the KMT government was generally able to control the political development in Taiwan and maintain the necessary social stability for focused economic growth through strong--but largely market friendly--state guidance administered by many foreign (including American) trained bureaucrats. (60) Ironically, there is some redeeming value to this one-way ratchet of political control: It turned out to be favorable to the onslaught of competition in the 1990s. By avoiding serious nepotism up to the 1990s, Taiwan largely avoided rent-seeking by corrupt politicians captured by business cronies, (61) thereby making open markets--through trade liberalization or antitrust enforcement--more likely.

But beginning in the 1980s, the KMT faced ever more challenges. For example, during the period from 1980 to 1992, each year there was some sort of social movement with salient goals and demands. (62) Public demonstrations, mostly peaceful, increased substantially from the early 1980s to the early 1990s, with a significant spike surrounding the lifting of martial law in 1987. (63) In the political arena, "Taiwan consciousness" became more prominent despite a major civil riot in early 1980. Trade negotiations with the United States became more demanding, especially following the enactment of the Trade and Tariff Act of 1984 that installed the section 301 retaliation apparatus. During this period, demands for political reforms surpassed even those for economic liberalization. The KMT government acquiesced in the formal organization of opposition parties in 1986 and lifted the martial law and a significant portion of foreign exchange controls in mid1987. From 1988 to the early 1990s, Taiwan deepened political reforms largely without a hitch. (64)

C. Legislative history of the Fair Trade Law

The gestation of Taiwan's FTL took almost two decades. In fact, when Taiwan began to offer tax incentives to develop its export-led economy in the early 1960s, there were already some private-sector suggestions to improve the business environment "by emulating advanced industrialized countries and enacting a fair trade act." (65) To be sure, this suggestion derived more from concern with unfair and unethical competition than from restrained competition. By 1970, Taiwan's government considered competition legislation for the first time. That year saw the Commercial Affairs Division of Taiwan's MOEA, which was to sponsor the formal FTL bill in 1986, include "monitoring and eradicating artificial manipulation of prices and studying whether to enact a fair trade law to enforce against domestic cartels" in its Plan for Improving Domestic Commerce. (66) A news search reveals that the MOEA gradually intensified its desire for the enactment of a fair trade law, announcing its intention to do so virtually once every year throughout the 1970s. (67)

This gradual approach may suggest either bureaucratic inertia or a careful approach so as to balance competing consumer and producer interests and their lobbying. It also reflects how Taiwan, a small economy susceptible to global economic conditions, dealt with external input and pressures. As such, Taiwan was always concerned with cost-push inflation. Also, Taiwan had been under a fifty-year Japanese colonial rule until 1945. Perceived by many local Taiwanese as an externally installed regime, the KMT government was both keen on social control and concerned with populist discontent. The painful lessons of hyperinflation, foodstuff stockpiling, and resulting civil unrest during the 1947-49 civil war with the Chinese Communist Party on mainland China were not lost on KMT leaders, especially Premier (and later President) Chiang Ching-Kuo, who had launched a miserably inadequate attempt to tackle stockpiling in Shanghai in mainland China in the late 1940s and was starting to assume power in Taiwan in the early 1970s.

As Taiwan again experienced inflationary pressures in 2011, it is interesting to note the impact of inflation on the enactment of competition law. When the first and second oil crises hit Taiwan around 1973 and 1979, Taiwan suffered import-led inflation compounded by the restrictive industrial policy for the domestic market. Prices for daily necessities went up significantly. (68) The PSC soon began monitoring prices. Premier Chiang was troubled by possible increased public concern with domestic cartels. Domestic cartels gradually became a public concern in the 1970s, and academics joined the debate and pushed for reform. In late 1975, inspired by the enactment of the Basic Law for Consumer Protection of 1968 in Japan, the Research, Development and Evaluation Commission (RDEC) of Taiwan's cabinet, the Executive Yuan (EY), awarded a collaborative research project to three law professors at National Taiwan University to study measures for consumer protection. (69) In 1976, this RDEC research report (the RDEC Report) recommended for the first time that, as part of a set of broad-based consumer protection initiatives of the government, the government enact a definitive "fair trade law (that is, a law against monopolies and restrictions of competition among enterprises) to maintain orderly competition and enhance the bargaining position of consumers." (70)

The bulk of this project dealt with overall consumer protection measures, and the principal recommendation was to follow Japan's example and enact a consumer protection law. However, the RDEC Report discussed at length harms posed by cartels and monopolies, as well as the inadequacies of then prevailing laws like LAMCI and the LAMCI Edict. Prevailing laws, argued the RDEC Report, were too vague. The authors argued that it was not clear, for example, if mergers of small and medium-sized businesses and government sponsorship of affiliated enterprise groups such as satellite factories would be permitted under these older rules. Likewise, the RDEC Report suggested that these rules would not permit procompetitive joint actions to enhance safety standards or allow refusals to deal in shoddy, unsafe goods, and that tying arrangements would not be captured under these rules. (71)

However, the RDEC Report then went on to recommend that the PSC strengthen its anti-inflation, antistockpiling, anticartel, price control, and related enforcement activities pursuant to the NML. (72) Amazingly, the RDEC Report also discussed the government-sponsored fruits and vegetables distribution company, and how streamlining its membership (consisting of former distributors) and enhancing its sales channel would reduce costs and lead to passed-on price reductions to consumers. (73) In other words, the RDEC Report follows a common practice for applied policy research in Taiwan: striving to strike a balance between the ideal and the reality by making do with current price control emergency laws and rules despite all their perceived inadequacies and planning for a better long-term solution through new antitrust legislation.

The RDEC report was a good beginning, but it went no further than offering a proposal (enact a modern competition law) and giving it a name (call it the Fair Trade Law). However, its importance lies in the legally minded intelligentsia showing their cards. The claim for needing a law like the FTL in the RDEC Report was echoed by other academics in the social sciences spearheading the consumer protection movement, which began around the mid-1970s as well. (74)

The most important impetus for enacting the FTL, I believe, came from the top--President Chiang. In his regular meeting with senior economic officials on May 29, 1979, he reportedly voiced grave concern over domestic cartels and predatory acquisitions. (75) For background, he was then dealing with the most difficult political task for martial law-ruled Taiwan: negotiating for Taiwan's security and stability after the United States de-recognized Taiwan virtually on Christmas Eve of 1978. He understood the need for reform to ensure political viability. Having spent his teenage years in the Soviet Union as a political hostage, he has always shown a proletarian-populist tendency to protect his people from perceived exploitation by businessmen. Inflation brought on by the second oil crisis made the domestic cartels even more unbearable. His trusted ministers reportedly stated that he was deeply concerned with the perceived misconduct of big business, such as a financial conglomerate controlling the Tenth Credit Co-operative allegedly engaging in, among other tactics, predatory loans, and acquisitions, like "[b]ig fish gobbling up small fries." (76)

Chiang's concerns explain the Taiwan government's swift and resolute actions in the following weeks and months to expedite preparations for drafting the FTL. A task force was formed within the MOEA for drafting the FTL the day following Chiang's remarks. Getting really serious for the first time after talking about a fair trade law for ten years, the MOEA announced in mid-July 1979 that it would send officials abroad to study foreign laws governing fair trade. Premier Sun Yun-Hsuen (himself a former MOEA Minister) made a formal announcement of the intent to enact a fair trade law in an important policy speech in late July 1979. For the first time in ten years the MOEA allocated a budget of NT$1 million (worth about US$250,000 at that time) in September 1979 to retain academics to draft a FTL bill. Some time before early January of 1980, the fourth meeting of the KMT's XIVth Plenum resolved to enact a fair trade law. In late February 1980, Taiwan's EY formally resolved to draft, and seek enactment of, this legislation. (77)

When the academic draft of the FTL bill (the Academic Bill) was completed in April 1982, the MOEA first thought it was too progressive for Taiwan's business community and would not pass. MOEA brought the Academic Bill in-house and dispatched officials abroad to research competition laws of leading countries and do a rewrite. The MOEA also thought the Academic Bill placed too much emphasis on antitrust laws and not enough on unfair competition laws. So it retained other academics to draft an Unfair Competition Law. The combined revised bill (the MOEA Bill), completed in March 1985, was almost half the length of the Academic Bill and included more provisions governing unfair competition. It became the basis for the EY Bill of May 1986 and of the definitive FTL enacted in 1991, after thirteen sessions of committee review in the Legislative Yuan, Taiwan's parliament.

Influenced mostly by German, and somewhat by Japanese and American competition laws, the Academic Bill was highly idealistic and progressive. For example, it would apply the FTL to all SOEs upon its effectiveness, without affording a grace period for transition. (78) To foster competition advocacy, agencies having primary jurisdiction over regulated industries would have to seek the TFTC's views, and regulated industries would not be exempt from competition rules against abuse of dominant market position. (79)

The Academic Bill also revealed an interesting--and somewhat inconsistent--attitude toward cartel legalization. It would require cartel agreements to receive government approval, but standard-setting and pure joint export cartel agreements would require only a government filing, and specialization cartel agreements and small-business cooperation cartel agreements seemed to have a higher chance of obtaining government approval if participating firms enjoyed less than twenty percent or fifteen percent, of market share, respectively. (80) Nonbinding suggestions by associations of small businesses to their members would not constitute an illegal boycott if intended to "combat big business or large-scale enterprises." (81) In other words, these provisions reveal an ideology favoring small tradesmen.

The Academic Bill would also have created strong procedural and enforcement mechanisms. It authorized class actions for violations of competition laws and installed new tribunals at the High Court and Supreme Court levels (rather than regular district courts) with special jurisdiction to hear competition law cases. (82) The TFTC would have had to provide a hearing before imposing administrative penalties on alleged offenders, but it would wield de facto subpoena powers as if it was the public prosecutor. (83) As maximum civil relief, double damages could be awarded. (84)

Two major developments had a significant impact on the drafting of the MOEA Bill and the EY Bill. First, in 1984, the U.S. Congress adopted the Trade and Tariff Act, including the section 301 trade retaliation measures. American pressure for more market access and prevention of intellectual property infringement and unfair competition intensified. As a result, the EY announced it would pursue "internationalization and liberalization." (85) Second, 1984 also saw the collapse of the Tenth Credit Co-operative--a concern voiced by President Chiang back in late 1979 as one of reasons for adopting a fair trade law--through over-leverage in illegal real estate lending through nominees. Two ministers resigned to take responsibility for the cabinet, and public outcries led to the government's formation of the ERC in 1985 as a way to seek consensus with academics and industries for further economic liberalization.

The ERC was a post-crisis gesture by Taiwan's government to regain social solidarity by mobilizing academic and business support for reforms. Many prominent business leaders and academics were invited to join this process, and the government pledged access to and support by senior government officials. For several months in early 1985 the public- and private-sector delegates developed agendas, formed working groups, farmed out applied policy studies, gathered recommendations, and reached a consensus for reforms backed by specific policy proposals for adoption by the government.

Senior academics in the Industries Subgroup of the ERC, including the chief draftsman of the Academic Bill who was supported by some young lawyers and economists, had a field day pushing for the FTUs enactment! (86) They lambasted the cartel practices of the 1970s and 1980s revealed by the PSC's enforcement records. (87) They also performed some elementary industrial output analysis, albeit without regard to imports, which were limited at that time in any event, to demonstrate the high industrial concentration justifying a cure like the FTL. (88) They concluded by suggesting the expeditious enactment of the FTL, with specific recommendations on ways to improve the MOEA Bill, including, for example, a proposal to elevate the proposed TFTC from a unit within the MOEA to a full-blown, ministerial-level agency. (89) Being a political process to appease the public, the ERC in its plenary session accepted virtually all major recommendations. As a result, the EY Bill was expeditiously produced in 1986, albeit still not containing all the ERC recommendations or provisions dropped from the Academic Bill.

But several important changes from the EY Bill were made. First, the TFTC was to be formed as an "independent" cabinet-level commission, rather than as a unit under the MOEA Bill and even the Academic Bill. In substance, the political leadership and top bureaucracy can control the recommendation and appointment of commissioners. Taiwan's Constitution does not really allow truly independent commissions like the Federal Trade Commission in the United States, as it provides that the EY shall be the supreme government body to exercise all the power of the executive branch. (90) But the reform frenzy of the post-martial law era from late 1980s to early 1990s largely ignored such cool-headed analysis. (91) In later years, the TFTC would become a favorite ground for academics, even those not specializing in competition law, to serve as one-term commissioners and get some real-world grounding. (92) Nonetheless, the TFTC got more clout than originally conceived.

Second, a compromise was reached: After five years, all SOEs will "graduate" from protectionist policies and be subject to the FTL. In this connection, the FTL as enacted in 1991 also required the government to publish periodically a list of monopolies and oligopolies, and many SOEs fit the bill! A 1993 list published by the TFTC as mandated shows that monopolies and oligopolies (including natural monopolies) dominated thirty-three relevant markets. Most of these dominant firms were SOEs or creatures of protectionist policies. Because of liberalization programs such as Taiwan's bid to join the World Trade Organization, by the time the five-year exemption for SOEs expired in the late 1990s, most of these sectors other than energy and public utilities had opened up. (93) In other words, Taiwan saw that it made no sense to maintain a monopolistic market structure and impose competition laws. Industrial policy dies hard, but competition policy--owing perhaps more to trade policy than the FTL--has struggled to come to the fore.


A. Open trade policy for a small and open economy

Taiwan is a good example to use when pondering the role of competition law in the Asian development state. As a relatively small economy depending heavily upon international trade, does Taiwan need competition laws at all? Foregoing discussions of the impact of market opening for sectors mentioned in TFTC's list of monopolies seem to suggest the answer is no. In the TFTC's first international symposium organized by the author, a foreign expert no less prominent than William Baxter suggested exactly this: "An open trade policy is far and away the least costly and often the most effective competition policy that can be achieved." (94) It is no surprise that of the two small--and advanced--economies in Asia, Singapore enacted a competition law only recently, while Hong Kong is still in the drafting phase. In part because of the size and increasing openness of Taiwan's economy, the TFTC has focused on compliance awareness and educational outreach, and has avoided confrontational trustbusting in its formative years. For more sizeable Asian economies such as China, Indonesia, India, and Japan, this argument is weaker but still valid: Compared with antitrust laws, the open trade policy incurs the lowest cost for policy mistakes. (95)

B. Infatuation with fairness

Much of Taiwan's economic reform since the 1980s revolves around the issues of efficiency and fairness (or equality) and the tradeoff between the two. These issues--fairness to competitors and counterparties (a form of industrial policy) and fairness to consumers (a form of social policy)--can burden competition laws. (96) The FTL's legislative history results in a tie: Some MOEA officials involved in drafting the FTL saw the coming confrontations and, in tabling the EY Bill to the Legislative Yuan in 1986, astutely advocated for consumer welfare and efficiency. MOEA Minister Lee's opening statement introducing the FTL bill in the Legislative Yuan went like this: "The Fair Trade Law should protect competition, not competitors, and certainly not inefficient competitors," paraphrasing approvingly the leading American case of Brunswick Corp. v. Pueblo Bowl-O-mat, Inc. on antitrust injury. (97) However, after the lifting of the martial law decree in mid1987, Taiwan soon became fervently preoccupied with fairness-related political and social reforms. Titling the bill as a fair trade law as far back as in the 1970s also betrays tensions between MOEA's infatuation with fairness and its own Chicago school efficiency rhetoric.

This schizophrenic phenomenon seems to prevail in many development states in Asia: Similar competition laws in Japan, Korea, China, Thailand, and Indonesia also have used labels, constructs, and texts like "fair," "just," or "proper," suggesting that competition laws may mean different things in different economies. (98) In Taiwan, Japan, Korea, and Thailand, where the legislative title of the Thai Trade Competition Act does not even refer to fair trade, the enforcement agencies are called fair trade commissions! All this is simply too pervasive to be explained away by mere coincidence.

As a unitary statute, the FTL is a hybrid of two competition codes: antitrust (free competition) law and (un)fair competition law. The problem is, like Siamese twins, these two portions of the competition code share the same legislative goals clause when they should not. So, it is entirely possible that fairness issues in the unfair competition law's part of the FTL got filtered into the antitrust portion of the FTL. The vague legislative goal in Article 1 of the FTL of "maintaining orderly conditions for trade" lends itself to a heightened emphasis on fairness. Economists seldom talk about orderly market conditions. By contrast, Frederick Hayek appears to be the only economist I know of to bother to explain what constitutes market order. To him, it is a "spontaneous order representing an equilibrium set up from within, rather than a made order." (99) Moreover, Taiwan's political economy since the 1970s means market order, as understood in the context of the FTL connotes dirigiste and etatisme. (100) Market order also harkens back to the Tang Code punishing the cornering of government-organized public markets mentioned above--the emperor perhaps cared more about not disrupting order in the public market than suffering efficiency losses. Also, as noted earlier, the legal elite in Taiwan's academia also influenced the FTL's drafting. As the RDEC Report shows, in the mid-1970s Taiwan's professors of civil law became interested in issues like unconscionability in consumer protection law, and they may have veered from there into proposing the FTUs enactment with a bent for fairness.

Length constraints do not permit an in-depth look into how commingled--and garbled--legislative goals in a unitary competition statute in other development states in Asia may have reinforced the emphasis of fairness over efficiency in their enforcement. But Taiwan shares with other development states in Asia the path of rapid economic growth, a strong and intrusive government, and the ever-present need to maintain social justice and solidarity during such rapid growth. Therefore, it would not be implausible to generalize from the Taiwan experience.

C. Challenges faced by Asian trustbusters

Competition law enforcement is an experience good--even in the leading jurisdiction of the United States, it has taken nearly a century since the enactment of the Sherman Act to "get it right" and for the consumer welfare goal to be placed on the pedestal. By contrast, the nature of competition law elsewhere--Asia included--is more ex ante administrative law than ex post judicial case law. (101) Asian enforcement authorities write sweeping rules while also rendering important ad hoc adjudicative decisions, and the competition rules they apply are by nature open-ended. Asia has rarely had the tradition or practice of installing independent commissioners charged solely with the task of enforcing well-defined laws. Judges in Asian development states often lack the independence, knowledge, and resources to challenge agency decisions--even if meaningful access to judicial review is afforded. Asia's competition authorities run the risk of regulating "fair" trade when enforcing their positive competition law. They may be forced by political pressure to treat maintaining competition as avoiding unjustifiable injury to competitors (and not necessarily consumers), that is, protecting competitors. They might also take issue with pricing decisions by leading--perhaps not yet dominant--firms so as to redistribute producer surplus as consumer surplus. Also, unlike the United States, Asia co-exists with SOEs. They not only occupy strategic positions and wield substantial market power, but pursuant to a social contract enshrined in practice, tradition, industrial policy, laws, or even a constitution, they can shoulder significant social responsibilities. Asian trustbusters, therefore, have more challenging tasks ahead.

Traditionally, competition law drafting and enforcement in Asia have been dominated by academic or bureaucratic lawyers, who naturally hark back to fairness as the main policy goal that would inform and drive competition law enforcement in Asia. They tend not to have studied economics or price theory, and few believe efficiency goals should dominate the enforcement of their municipal competition laws. (102)

Taiwan now has a rather sophisticated framework for enforcing the FTL. The TFTC astutely focused its formative years on publicizing competition law and instilling a law-abiding consciousness. As a mature agency twenty years after the FTUs passage, it has done a reasonably good job. But I think this is in part because of the smaller size of its economy and the more open trade policy since the mid-1980s. Indeed, soon after it was established, the TFTC got into a pattern that has persisted today: its workload is heavily represented by genuine unfair competition--instead of antitrust--cases. Several leading examples of the TFTC's enforcement actions nonetheless illustrate the difficult challenges it has faced in the antitrust arena.

International cartel comes up as the first example. Despite the FTUs cartel legalization rules, Taiwan has not seen a proliferation of cartels. However, the TFTC was not watching the radar screen, discovering only after the statute of limitations for enforcement had run that Taiwanese LCD manufacturers allegedly participated in an international cartel ring that led to sanctions by European and American authorities. These enforcement actions abroad, apparently based in part on confessions and whistle blowing by Korean producer Samsung, led to mixed reactions in Taiwan. It would have been interesting to see, had the TFTC been more alert, whether it would have taken strong (but obviously politically incorrect) enforcement actions against these Taiwanese manufacturers. Export promotion has always been a key policy in Taiwan. Should Taiwan be concerned with the welfare of some foreign consumers buying LCD-related products? Ironically, a leading Taiwanese newspaper editorial even played on economic nationalism and chided the TFTC for not helping the accused Taiwanese manufacturers to cope with foreign investigations. (103) Also, as if in a gesture of sympathy to publicly listed national champions, Taiwan's vice premier even invited these companies for a meeting to see how the government could help their defense if they thought they were unfairly prosecuted. (104)

Another example is in the area of retail trade and technology licensing. Microsoft's pricing for its software created a public uproar (mainly among young students) that followed anticounterfeiting campaigns by Microsoft and other members in the Business Software Alliance. Goaded by Taiwan's populist parliamentarians, a massive political storm soon gathered, forcing the TFTC to start investigating the pricing, licensing, and other practices of Microsoft in Taiwan pursuant to Article 10 of the FTL, the provision governing abuse by dominant firms. The investigations finally led to an administrative settlement that, among other things, allowed the TFTC to monitor and offer comments on Microsoft's pricing and other practices in Taiwan. (105) This case suggests that using competition law as a tool for fair trade could lead to plain price regulation. Presumably, government-compelled price reductions by a monopolist would forestall rather than invite competition. Imagine also what would happen if the enforcement authorities of a much bigger economy with rampant counterfeiting and strategic aspirations to foster indigenous innovations, like China, follow suit. (106)

In another Taiwan case, three foreign companies Philips, Sony, and Taiyo Yuden were alleged to have engaged in collective anticompetitive conduct. They jointly licensed CD-ROM-related technologies to Taiwan manufacturers at a flat royalty rate, which became more onerous (and hence "unfair") to the Taiwanese manufacturers the more they pursued low-price, high-volume strategies to drive out foreign competitors, namely, other licensees of these foreign licensors.

The TFTC reacted to complaints by Taiwanese manufacturers and invoked the rule governing abuse of dominant market position to begin investigations. TFTC sanctions against the three foreign firms eventually led to the termination of otherwise efficient joint licensing of complementary technologies. This is a lose-lose result for both licensors and licensees. Taiwan's trading partners also threatened to retaliate if the Taiwan government, in this continuing saga of internecine price war, invoked compulsory licensing rules under Taiwan's Patent Law to force continued licensing to the Taiwanese manufacturers. This experience also led to uncertainty as to what was the right--or fair--level of royalties despite the tautological exemption of fair use of intellectual property rights under Article 45 of the FTL. (107)

Taiwan is not the only Asian jurisdiction to find confusion and checkered enforcement in antitrust matters. In Japan, perceived fairness rather than efficiency has also informed competition law enforcement, as shown by Commissioner Michiko Ariga's foreword for Iyori and Uesugi's treatise on Japanese competition law and confirmed by the Organisation for Economic Co-operation and Development (OECD). (108) As a result of the "widespread public concern to protect the value of fairness," a go-easy attitude toward private monopolies prevailed, and the Japan Fair Trade Commission's (JFTC) fairness-based enforcement stood competition law on its head by actually restricting competition! (109) In Japan, competition and growth are seen as inconsistent goals forcing a tradeoff. (110) The OECD also believes the JFTC enjoys the strongest, widest support in the business community when it enforces this part of the Japanese Antimonopoly Law, causing the JFTC to use these rules to consolidate "its legitimacy and public image." (111)

If Japan represents a case of big business, weak competition law, and a weak enforcement agency, Korea in contrast reveals a case of big business, intrusive law, and overreaching regulators. Big Korean businesses are regulated through competition law (including rules governing abuse of dominant market position) and by a strong enforcement agency to ensure that formidable chaebol (large, family-controlled conglomerates) behave fairly with respect to counterparties, affiliates, and other stakeholders. Amazingly, the Korea Fair Trade Commission's (KFTC) intrusive chaebol regulation goes beyond industrial concentration and includes corporate law considerations such as fiduciary duty. (112) In the United States, antitrust enforcers would try to break up these chaebols; in Korea the political solution instead is to regulate them and maintain a socially acceptable level of industrial concentration and responsible conduct. This is partly because of different notions of social justice--and fairness. (113) The political need to meet social expectations of fairness also makes the KFTC an uber financial regulator. (114) In the area of vertical restraints law, Korea, like Japan, has also enforced its antitrust laws so as to limit promotional offers. It has been noted that in Japan and Korea, "regulation stymies efficiency gains by preventing large scale stores from driving the morn-and-pop shops out of business." (115)

In Asia, economists and economic thinking have yet to have a significant impact on shaping competition law enforcement. For enforcement officials, less grounding in antitrust economics--or even just economics in general--could suggest that they tend not to subscribe to consumer welfare as the goal of competition laws. (116) In other words, they then tend to justify their enforcement in terms of some notion of fairness. Perhaps ahead of its Asian peers, the KFTC is suggested by a survey to show "every sign of wanting to be the Bundeskartellamt of Asia." (117) This finding shows the KFTC to have the second largest staff of economists in its workforce (110 individuals, next only to 122 economists at American enforcement agencies), and as the only one of eight relevant Asian jurisdictions to have more economists than lawyers! (118) Hopefully, over time this quantitative lead will result in a qualitative improvement and help to steer Korean enforcement toward the efficiency-based competition law model.

Drawing more comparisons, I believe that antitrust officials and policy makers in China face the most daunting and yet most interesting challenge. Already the world's factory and now well positioned to become one of the largest and most lucrative markets for goods and services, Communist Party-controlled China has embraced some sort of competition policy by enacting the Antimonopoly Law and the LAUC--but only on top of the Price Law, and a whole host of industry-specific laws and regulations allowing state intervention through SOEs, administrative monopolies, or market-restrictive measures for reasons varying from developing strategic industries to shouldering social responsibilities. (119) Therefore, this competition policy constitutes only part of a policy menu that also resorts to serious industrial policy to foster national champions in strategic sectors and social policies showing traits of a market economy "with Chinese characteristics."

Technocrats in China are beholden to the Chinese Communist Party leadership, state apparatus, and public sentiment, and they hustle around busily to establish China's own industrial standards through indigenous innovation policies. As long as there is political resistance to full blown democracy, mass private litigation--in antitrust, securities, product liability, and similar fields--ironically can be a good functional substitute for citizen participation and solidarity. Ever suffering from inflationary pressure and higher prices, China took action in 2011, albeit under the Price Law instead of the Antimonopoly Law, against Unilever for raising prices to reflect cost increases. This enforcement action suggests that Chinese officials were also deeply concerned with issues like "fairness" and "disturbing market order." (120) China's merger review regime and practice could very well have a far-reaching impact even on deals that are largely foreign, as long as participating companies abroad have sizeable operations in China, as they increasingly do. Foreign firms became justifiably concerned with being targeted even before the passage of China's Antimonopoly Law after the issuance of a Chinese government competition report criticizing Microsoft, Kodak, Tetra Pak, and others as monopolies. (121)


This article is the first attempt to examine the heart and soul of Taiwan's FTL through a review spanning the forty years that cover its long gestation (1970-1991) and the first two decades since its enactment (1991-2011). A historical approach is taken here to explore how traditional Chinese philosophers and monarchs thought about business, tradesmen, markets, and competition. I also tried to understand the meaning and enforcement of primitive antirust statutes in ancient China, like the offense against "cornering the (public) market" since the Tang Code. This excursion reveals that nonefficiency goals such as fairness, public order, industrial policy, and the leadership's perception of social justice were pervasive and formidable throughout both Chinese history and the post-War economic development in KMT-ruled Taiwan. Thus, lesson one: I commend to readers the historical retrospective in this article for a better understanding of the younger competition law regimes around the world today.

The rich cultural, historical, and social contexts revealed by this historical review explain why Taiwan's FTL did not just copy the title of similar Japanese and Korean "fair trade" legislation adopted earlier. To be sure, there was clearly a transplant engineered by Taiwan's legal elite. But borrowing from German, Japanese, and American competition laws occurred largely at the technical--surface--level of the FTL. At its core, home-grown fairness-related goals occupy a role no less important than efficiency or consumer welfare. Therefore, even though external influences such as American trade pressure indeed influenced the enactment of Taiwan's FTL, Taiwan's competition law does not necessarily embrace the Washington Consensus on which competition laws in the developed world are premised. Hence, lesson two: Competition laws may mean different things in different jurisdictions. Younger competition laws have a "fit" that is very different from older ones in North America and Europe. (122)

In this article I establish that Taiwan's experience is just a part of the still unfolding--and complex--story of the growth of Asian competition laws. Within length constraints, I nevertheless have uncovered enough traces in Asian competition law regimes that reflect the fairness paradigm. Hence, lesson three: The development state model is a common thread among definitive competition laws that were enacted across Asian economies.

Indeed, a corollary to lesson three is that the more entrenched the development state model, the closer an indigenous Asian competition law regime will veer to the fairness paradigm. This proposition explains why Singapore (which only recently adopted a competition law, perhaps for "me too" reasons) and Hong Kong (which has been thinking for years about adopting a competition ordinance) do not belong in this camp. It also explains why enforcement of the fairness-minded FTL has been rather moderate in Taiwan. All three have relatively small and open economies susceptible to influences from the global trading community, which leads us to lesson four: For smaller and more open jurisdictions, open trade policy may be just as effective as competition law. In the case of Taiwan, despite the domestic political frenzy in the 1980s surrounding the drafting and enactment of the FTL, the need to be integrated into the global trading community has pushed its competition law regime to regress toward the Washington Consensus.

This in turn leads to lesson five: Asian trustbusters face a daunting challenge ahead. Competition laws in Asia were more often transplanted than home grown. Failure to truly internalize the need to foster market competition allows positive competition laws in Asia to drift toward nonefficiency goals. These competition laws do not command any higher order of priority, respect, or importance among the full panoply of municipal economic laws or policies of Asian development states in Asia. Nor do fair trade commissions or similar competition authorities in Asia necessarily command a strong position in the government hierarchy. Most important, competition laws in Asia do not receive enough political support. Indeed, there are other ways in various Asian polities to deal with competition issues or even to suppress competition. Lack of a strong political commitment to robust competition laws, while clinging to fuzzy notions of fairness, can reduce the predictability of Asian competition law enforcement.

In larger Asian economies like China, Japan, and India, these challenges seem more daunting. Larger economies--such as the United States and the European Union have the size advantage necessary to qualify as a good model. Larger Asian economies for better or for worse may embrace the fairness paradigm and try to turn it into the leading Asian competition law model because, to the political leadership, the fairness paradigm seems to fit better in the development state. So, finally, herewith lesson six: The tendency in large Asian economies to pursue fairness in designing or implementing a competition law regime could have profound--and not necessarily benign--ramifications across the region, around the world, and indeed for their own long-term development.

A smaller economy, Taiwan does not aspire to become anyone's model. But it has been mostly successful in the struggle to outgrow the fairness fever. This experience alone is an important contribution to antitrust scholarship. Having joined the club of modern competition law regimes, Asian development states would do well to reflect seriously upon the heart and soul of these laws.

(1) This article does not attempt a thorough, technical treatment of antitrust jurisprudence arising from Taiwan's FTL. For that, see Lawrence S. Liu, Fostering Competition Law and Policy: A Facade of Taiwan's Political Economy, 1 WASH U. GLOBAL STUD. L. REV. 77 (2002). For information relating to the FTL and the TFTC, see Fair Trade Comm'n, /english/index.aspx.

(2) FTL, art. 46(2) (1991).

(3) FTL, art. 46 (2011). The present text resulted from an amendment by some legislators aspiring to accord the FTL the laurels of an economic Magna Carta. But the bold qualifier that other laws apply only insofar as they do not contravene the legislative goals of the FTL also creates confusion as to how exactly the primary jurisdiction exemption will apply.

(4) Id. art. 45.

(5) Id. art. 1. The "consumer welfare" language had been deleted from the original draft prepared by academics, but was restored in the 1991 version. See infra part IV.C for the FTL's legislative history. For a similar debate on the multiple, and perhaps conflicting goals, of American antitrust laws, see THE POLITICAL ECONOMY OF THE SHERMAN ACT: THE FIRST ONE HUNDRED YEARS (E. Thomas Sullivan ed., 1991). Note also the commentary following the Atlantic divide over the merger review of the General Electric/Honeywell case, that "[the United States and the European Union] did not share a common belief either in the supremacy of economic analysis or in a consumer welfare standard." Ken Heyer, A World of Uncertainty: Economics and the Globalization of Antitrust, 72 ANTITRUST L.J. 375, 401 (2005).

(6) FTL, art. 2 (2011).

(7) FTL, art. 10(2) (1991). See infra text at note 93 for a list of monopolies published.

(8) FTL, art. 5(1) (2011).

(9) Id. art. 5(2) (2011).

(10) Id. arts. 5-1(1), 5-1(2) (2011). In general, an enterprise will not be viewed as a single-firm monopoly if its market share falls below fifty percent. Likewise, a two-firm oligopoly will not be found if the companies' total market share falls below two-thirds; a three-firm oligopoly will not be found if the companies' total market share falls below seventy-five percent. However, despite the market structure, if an enterprise has no more than a one-tenth market share or if its annual sales in the preceding fiscal year did not reach NT$1 billion (about US$33.3 million), it will not be deemed a monopoly.

(11) Id. art. 5-1(3).

(12) Id. art. 10(1).

(13) Id. art. 10(2).

(14) Id. art. 10(3).

(15) Id. art. 10(4).

(16) Id. art. 14.

(17) Id.

(18) Id. art. 15.

(19) Id. arts. 16, 17.

(20) These include statutory mergers, acquisition of one-third of another enterprise, taking over all or substantially all of the property and assets of another enterprise, entrusting the management of business to another enterprise, and acquiring direct or indirect control of the business operations or personnel of another enterprise. Id. art. 6(1). Review of combinations involving affiliates, an unnecessarily cumbersome requirement, was excluded as a result of the 2002 amendment. Id. art. 11-1.

(21) A combination meets the size test (1) if it results in a post-merger enterprise holding one-third or more of the relevant market; (2) if one of the enterprises in the combination already holds one-fourth or more of the relevant market; or (3) if one of the enterprises joining the combination is a nonfinancial firm that already had NT$10 billion (about US$333 million) of annual sales or more during the preceding fiscal year and the other enterprise in the combination had annual sales of NT$1 billion (about US$33.3 million) or more for the same period. In the case of a merging financial firm, the annual sales threshold is NT$20 billion (about US$666 million) or more. Id. art. 11(1), 11(2).

(22) The TFTC may demand further information through "second requests" if it deems it appropriate, thereby extending the deadline for clearance for another thirty days. Id. art. 11.

(23) Id. art. 12(1).

(24) Id. art. 12(2).

(25) Id. art. 13.

(26) Id. arts. 19(5) (theft of trade secrets), 20 (passing off), 21 (false advertising), 22 (trade libel), and 23 and through 23-4 (multi-level distribution schemes).

(27) Id. arts. 18 (governing resale price maintenance), 19(1) (boycott), 19(2) (discriminatory treatment), 19(3) (coercion or inducement to deal), 19(4) (coercion or inducement to collude or merge), and 19(6) (catchall for all vertical nonprice restraints).

(28) Id. art. 24.

(29) Id. art. 25, 26, 27, 27-1.

(30) Organic Statute for the Fair Trade Commission, art. 11(1), 12 (1991).

(31) Id. art. 11(1).

(32) Id. art. 13.

(33) Id. art. 35.

(34) Id. art. 36.

(35) Id. art. 35, 36.

(36) Id. art. 35, 36, 37, 41.

(37) Id. art. 30, 31, 32(1).

(38) Id. art. 32(2).


(40) See Liu, supra note 1, at 83.

(41) See ZHAO & CHEN, supra note 39, at 550-51.

(42) See Liu, supra note 1, at 84.

(43) See id. at 83 (citing Miscellaneous Provisions of Tang Code, art. 33), Lawrence S. Liu, Taiwan, in D1 WORLD LAW OF COMPETITION $ 1.01 n.2 (Julian O. von Kalinowski ed., 1987).

(44) DERK BODDE &: CLARENCE MORRIS, LAW IN IMPERIAL CHINA 88, 185-86, 264-71 (1967).


(46) OLSON, supra note 45, at 148-50.

(47) See ZHAO & CHEN, supra note 39, at 441, 447.

(48) For an introduction to the earlier development of judicial review and constitutionalism in Taiwan, see Lawrence S. Liu, Judicial Review and Emerging Constitutionalism: The Uneasy Case for the Republic of China on Taiwan, 39 AM. J. COMP. L. 509 (1991).

(49) The other two principles are the Principle of Nationalism and the Principle of People's Political Rights.

(50) It also provides that, as an exception, nationals may operate such businesses if permitted by law.


(52) See Lawrence S. Liu, Experimenting with Competition Law: A Preliminary Analysis of the Draft Fair Trade Law of Taiwan, the Republic of China, 13 WORLD COMPETITION L. & ECON. REV. 5 (1989).

(53) See id. at 8.

(54) Id.

(55) Id.

(56) Note also at that time that 42 (or 13.6%) of the 304 products were produced solely by a single firm (with state-owned enterprises representing 11.8%). For fourteen products (or 4.6%), 90% or more was manufactured by only two producers. For 52 products (or 17.2%), a single firm accounted for 50% to 90% of the production. For 50 products (or 16.4%), a single firm produced 33% to 50%. For 24 products (or 7.9%), the top three firms produced over 50%. See Chung-Chen Lin, Cycles of Mutual Exploitation by Weak Groups under Authoritarianism--An Anatomy of Taiwan's Economic System, in MICHAEL HSIAO, et al., MONOPOLY AND EXPLOITATIONS 188 (1989) (in Chinese), drawing from empirical data in ECONOMIC REFORM COMMITTEE, FINAL REPORTS vol. 4, 137-54 (1985) (in Chinese) [hereinafter ERC REPORT].

(57) See Lin, supra note 56, at 189-92.

(58) See id. at 193-94. Using PSC records, Lin documented price cartels formed from the mid-1970s to the-mid 1980s for cement, gravel, tires, bicycle parts, acrylic, pressurized glass, carbonated drinks bottling, movie tickets, cement, soap, magnetic tape, eggs, school writing books, ice making, gas, detergents, retreading, man-made fiber, steel, and color-photo developing. He also found production and sales cartels for glass, cotton, charcoal, and vegetables. Using industry group records, Lin found export cartels involving vegetables and machinery. The import cartels involved cotton, soy beans, and machinery; rationalization cartels involved cotton and machinery.

(59) See Gill Yen, State-Owned Manufacturing Enterprises, Large PrivatelyOwned Enterprises and Allocative Efficiency--Comment on Fostering an Environment Conducive to Free and Fair Competition, in HSIAO, supra note 56, at 119, 127-28. See also ING-JAW LAI, ANNOTATED TREATISE ON SECURITIES AND EXCHANGE LAW 331-38 (1996) (in Chinese). Hsinchu's chairman fled the country when his company went down and investor complaints and investigations began.

(60) These challenges include the Korean and Vietnam Wars and China's shelling and failed invasions of Taiwan's offshore islands, withdrawal from United Nations membership in 1971, and de-recognition by Japan in 1972 and by the United States in 1978. For KMT's autarchy, see Yun-Han Chu, Oligopoly Economy and Authoritarian Political System, in HSIAO, supra note 56, at 139, 142-45, and The Realignment of Business-Government Relations and Regime Transition in Taiwan, in BUSINESS AND GOVERNMENT IN INDUSTRIALIZING ASIA 113 (Andrew Macintyre ed., 1994). For an argument that Taiwan followed market-friendly industrial policy, see ROBERT WADE, GOVERNING THE MARKET: ECONOMIC THEORY AND THE ROLE OF GOVERNMENT IN EAST ASIAN INDUSTRIALIZATION (1990).

(61) See Chu, supra note 60, at 146-47.

(62) These movements included: consumer protection (1980), community-based antipollution (1980), environment and habitat protection (1981), feminism (1982), aborigines (1983), students (1986), New Testament religious groups (1986), labor (1987), farmers (1987), teachers' rights (1987), welfare for the handicapped (1987), veterans' rights (1987), mainlander citizens' right to visit China (1987), reinstatement of rights of political dissidents (1987), right of blacklisted politically activist Taiwanese emigres to return (1988), protest against a nuclear power plant (1988), Hakka dialect reinstatement (1988), housing reform (1988), a peace movement in memory of the February 28th subethnic conflict (1989), the intelligentsia's protest of a military general becoming premier (1990), educational reform (1990), car accident victims' rights (1990), free speech advocating Taiwan independence (1991), boycott against United Daily News for being too pro-China (1992), protection and elimination of child prostitutes (1992), and clean elections (1992). See SOCIOLOGY AND TAIWAN SOCIETY 436 (Chen-Hueng Wang & Hai-Yuan Chu eds., 2d ed. 2003) (in Chinese).

(63) The number of public demonstrations and protests almost doubled every two years. For example, between the fervent years from 1983 to 1988, there were a total of 4043 incidents, including 240 events in 1983, 277 events in 1984, 427 events in 1985, 484 events in 1986, 995 events in 1987 and 1620 events in 1988. See id. at 437.

(64) Further reforms include a relatively smooth power transition after strongman Chiang Ching-Kuo died during his presidency in 1988, termination of the emergency clause of the Constitution in 1991 as a start to engaging China peacefully, and rejuvenation of the parliament Legislative Yuan by holding elections in 1992 to replace holdover members elected from the mainland China era.

(65) See Gan, Counterfeits, Receipts and Kick-backs Affecting Law-Abiding Businesses: Supporting Amendment to the Statute for Encouraging Investment But Fair Trade Is Also Needed, UNITED DAILY NEWS, Jan. 8, 1962, at 5 (in Chinese). This op-ed piece argued that, despite tax incentives under the Statute for Encouragement of Investment of 1960, irregular business conduct, such as counterfeiting, tax-cheating, and kick-backs, was adversely affecting the interests of law-abiding businesses.

(66) See UNITED DAILY NEWS, July 25, 1970, at 8.

(67) See UNITED DAILY NEWS, Nov. 13, 1970, at 8; ECON. DAILY NEWS, Jan. 17, 1973, at 2; ECON. DAILY NEWS, July 6, 1974, at 1; ECON. DAILY NEWS, July 17, 1974, at 1; UNITED DAILY NEWS, Sept. 1, 1975, at 2; ECON. DAILY NEWS, Jan. 28, 1976, at 2; ECON. DAILY NEWS, March 5, 1977, at 1; UNITED DAILY NEWS, June 18, 1977, at 2; UNITED DAILY NEWS, March 4, 1978, at 2 (MOEA minister announcing intent to draft the FTL for the first time); UNITED DAILY NEWS, May 31, 1979, at 2 (MOEA forming task force for drafting the FTL); UNITED DALLY NEWS, July 16, 1979, at 2 (MOEA to send officials abroad to study foreign laws governing fair trade); UNITED DAILY NEWS, July 22, 1979, at 2 (Premier Sun announcing intent to enact a fair trade law); UNITED DAILY NEWS, Sept. 23, 1979, at 2 (MOEA for the first time allocating a budget of NT$1 million, or about US$250,000, to retain academics to draft the FTL bill).

(68) See Lin, supra note 56, for cartel agreements covering many daily necessity items around this time. See also Editorial, Premier Wu's Cabinet Should Learn from Lessons of the Inflation in the 1980s, COMMERCIAL TIMES, May 6, 2011, at 2 (in Chinese).

(69) In Taiwan, agencies often retain academics as ad hoc advisers. The assignment can be for short-term consulting on specific issues or for more important and longer-term policy research. Because of workload and human resource constraints, agencies sometimes even outsource the drafting or study of major laws or policy measures to research institutions.

(70) RDEC, A STUDY OF CONSUMER PROTECTION 1, 5, 17--19 (1976) (emphasis added) (in Chinese). The RDEC has added an academic touch to it, and although its chairman is a political appointee, traditionally he or she has a strong academic background in social sciences. The three law professors are Yu-Po Cheng, Yi-Nan Liaw and Zhong-Rong Liu. This project was collaborative in the sense that the RDEC provided some staff support and arranged for various agencies, including the PSC, to work with the academic team. Both Professor Cheng and Professor Liaw later became Associate Justices of the Council of Grand Justices, Taiwan's de facto constitutional court. Professor Liaw and Professor Liu both later served as Vice Chairman of the TFTC.

(71) Id. at 17-18.

(72) Id. at 19-20.

(73) Id. at 20-21.

(74) The RDEC Report received some news coverage. See UNITED DAILY NEWS, July 21, 1976, at 3. A pioneer of Taiwan's consumer movement, Professor Chai Sung-Ling also began to lobby for consumer protection in public speeches in 1976. See UNITED DAILY NEWS, Dec. 27, 1976, at 6; ECON. DAILY NEWS, May 30, 1977, at 2.

(75) See UNITED DAILY NEWS, June 3, 1979, at 2; UNITED DAILY NEWS, Aug. 27, 1979, at 2.

(76) UNITED DAILY NEWS, Aug. 27, 1979, at 2. These ministers indicated that in addition to cartels, affiliated companies and conglomeration were also among Chiang's concerns. Id.

(77) See UNITED DAILY NEWS, May 31, 1979, at 2, July 16, 1979, at 2, July 22, 1979, at 2, Sept. 23, 1979, at 2; ECON.DAILY NEWS, Jan. 9, 1980, at 2; UNITED DAILY NEWS, Feb. 22, 1980, at 3. The lead academic for drafting the FTL was Professor Liaw of NTU, who had been involved in the RDEC Report. See supra note 70.

(78) Draft Fair Trade Law: General Explanations and Text (Academic Bill) art. 78 (drafted by Prof. Yi-Nan Liaw, National Taiwan Univ.) (on file with author).

(79) Id. art. 79.

(80) Id. arts. 5, 9, 7(3), 8(4).

(81) Id. art. 28(1).

(82) Id. arts. 51, 76. Despite using the term "class actions," the Academic Bill merely recommended some sort of group litigation with more relaxed party joinder rules. This is because Taiwan, which is a civil law jurisdiction, does not entertain an opt-out feature for group litigation. Rather, its concept of a properly constituted group litigation is premised on each litigant actually opting in to the litigation.

(83) Id. arts. 56, 55.

(84) Id. art. 46.


(86) See ERC REPORT, supra note 56, at 119-23.

(87) Id. at 144-50.

(88) Id. at 137-45.

(89) Id. at 119-23.

(90) See ROC Constitution, art. 53, Office of the President, ROC,

(91) The view that such ministerial-level commissions cannot be independent as they would deprive the EY of its the powers under Taiwan's Constitution was later confirmed when the Council of Grand Justices in 2006 handed down Judicial Yuan Interpretation No. 613, in a case involving the constitutionality of the National Communications Commission, the telecommunication and media networks regulator created in the late 1990s.

(92) These academics-turned-TFTC-commissioners always return to academia lest they lose their tenure. They nevertheless offered some checks on the TFTC's professional bureaucrats, especially in its formative years. For example, urged by academic-turned-commissioners in the early 1990s, the TFTC adopted the unique practice of the Council of Grand Justices to entertain and publish dissenting opinions. In Taiwan, publication of dissenting views in en banc judicial deliberations is not allowed even in the regular court system!

(93) These markets were railway services; type I telecommunication services; port services; airport ground handling; domestic (highway) bus transportation; life insurance; bills finance business; stock exchange; the securities margin business; terrestrial television; brown sugar; tobacco products; liquor and spirits; terephthalic acid; ethylene; gasoline (including crude oil); other fuels; diesel fuel; tar; natural gas; petroleum gas; nitrogenous fertilizer; compound fertilizer; buses; motorcycles; PBX switching machines for type I telecommunications services; fine salt; flat glass; electric power; home-use gas pipeline distribution; home-use gas tank distribution; tap water (Taipei city); and tap water (elsewhere in Taiwan). See 2 TFTC GAZETTE 43-47 (Feb. 1993). Note that the World Bank thought at one time that Taiwan's SOEs (including KMT-controlled businesses) had a larger share of Taiwan's gross domestic product than their Korean counterparts' share in Korea. See WORLD BANK, THE EAST ASIAN MIRACLE: ECONOMIC GROWTH AND PUBLIC POLICY 184-85 (1993).

(94) See William F. Baxter, Regulating Market Power in a Modern and Geographically Small Nation, in INTERNATIONAL HARMONIZATION OF COMPETITION LAWS 11, 12 (Chia-Jui Cheng, Lawrence S. Liu & Chih-Kang Wang eds., 1995), and Michal S. Gal, Market Conditions under the Magnifying Glass: General Prescriptions for Optimal Competition Policy for Small Market Economies, 50 AM. J. COMP. L. 303 (2002).

(95) See William Kovacic, Failed Expectations: The Troubled Past and Uncertain Future of the Sherman Act as a Tool for Deconcentration, 74 IOWA L. REV. 1105 (1989).

(96) See HERBERT HOVENKAMP, ECONOMICS AND FEDERAL ANTITRUST LAW 40-54 (1985) (antitrust laws are not free from politics and ideology).

(97) See Minister Ta-hai Lee, Opening Remarks, LY Joint Session of Judiciary and Economic Affairs Committees (June 26, 1986), 75 OFFICIAL GAZETTE OF THE LEGISLATIVE YUAN, Issue 1978, at 2-3 (Sept. 20, 1986), (citing Brunswick Corp. v. Pueblo Bow-O-mat, Inc., 429 U.S. 477 (1977)).

(98) For example, the full title of Japan's 1947 Antimonopoly Law is an Act Concerning Prohibition of Private Monopoly and Maintenance of Fair Trade, and Korea's competition law of 1981 is similarly entitled the Monopoly Regulation and Fair Trade Law (emphasis added). Sections 2(9) and 19 of the Japanese Antimonopoly Law blend free competition and fair competition together under the definition of "unfair business practices"--a practice copied into Article 19 of Taiwan's FTL. See HIROSHI IYORI & AKINORI UESUGI, THE ANTIMONOPOLY LAWS OF JAPAN 92 (1983). Section 15 of Korea's Fair Trade Law also contains essentially the same prohibition found in sections 2(9) and 19 of the Japanese Antimonopoly Law! For a succinct description of Korean Fair Trade Law, see Seung Wha Chang, Section 36 (Korea), in WORLD ANTITRUST LAW AND PRACTICE: a COMPREHENSIVE MANUAL FOR LAWYERS AND BUSINESSES (James J. Garrett ed., 1997). Section 29 of Thailand's Trade Commission Act follows Article 24 of Taiwan's FTL and may suffer the same problems of vagueness and overbreadth. See Sakda Thanitcul, Competition Law in Thailand: A Preliminary Analysis, 1 WASH. U. GLOBAL STUD. L. REV. 171, 179-80 (2002). In section 19 of Indonesia's Law No. 5 of 1999 Concerning the Prohibition of Monopolistic Practices and Unfair Business Competition, there is likewise a hodgepodge of antitrust and unfair competition rules. See Hikamahanto Juwana, An Overview of Indonesia's Antimonopoly Law, 1 WASH. U. GLOBAL STUD. L. REV. 185 (2002). Likewise, China's Law Against Unfair Competition (LAUC) (emphasis added), which predates the Antimonopoly Law but follows the same strand of price- and competition-control rules that began in the 1980s, actually contains quite a few antitrust rules. For a comparison between the FTL and LAUC, see Lawrence S. Liu, Efficiency, Fairness, Adversary and Moralsuasion: A Tale of Two Chinese Competition Laws, in INTERNATIONAL HARMONIZATION OF COMPETITION LAWS, supra note 94, at 317.

(99) See F. A. HAYEK, I LAW, LEGISLATION AND LIBERTY 36-42 (1973).

(100) See Alice Amsden, Taiwan's Economic History: A Case of Etatisme and Challenge to Dependent Theory, 3 MODERN CHINA 341 (1979).

(101) This, in my view, may be the dominant distinction between the American and European competition law experience, even as their substantive rules gradually converge. On how European competition laws came about, see generally DAVID J. GERBER, LAW AND COMPETITION IN TWENTIETH CENTURY EUROPE: PROTECTING PROMETHEUS (1998). For an earlier but still relevant assessment of competition laws in Asia, see CARL J. GREEN & DOUGLAS E. ROSENTHAL, COMPETITION REGULATION IN THE PACIFIC RIM (1996).

(102) On efficiency versus fairness in general, see Louis KAPLOW & STEVEN SHAVELL, FAIRNESS VERSUS WELFARE (2002).

(103) Editorial, We Also Need the FTC When Our Industries Meet Global Competition, ECON. DAILY NEWS, Dec. 21, 2010, at 2.

(104) LCD Display Manufacturers Fined, and Managers Invited by the Cabinet to Study Response, ECON. DAILY NEWS, Dec. 14, 2010, at AA2.

(105) See Liu, supra note 1, at 118. The author represented Microsoft in this case. Article 10 of Taiwan's FTL was inspired by Article 86 of the Treaty of Rome (by way of German antitrust scholarship). Note that in the EU's United Brands case concerning bananas, the judgment of the European Court of Justice "stated that prices are excessive when they have no reasonable relation to the economic value of the product supplied, and article 86 may be breached if the consumers suffered as a result of such pricing policies, even if no effect on competition could be shown." DANIEL G. GOYDER, EEC COMPETITION LAW, 309 (1988).

(106) See U.S. INT'L TRADE COMM'N, CHINA: EFFECTS OF INTELLECTUAL PROPERTY INFRINGEMENT AND INDIGENOUS INNOVATION POLICIES ON THE U.S. ECONOMY (2011). As a result of bilateral trade consultations with the United States, in late June 2011 China's Ministry of Finance revoked three procurement rules requiring indigenous innovations, which would have materially adversely affected foreign bidders.

(107) See Liu, supra note 1, at 115-18. I represented Philips in this case.

(108) Michiko Ariga, Foreword to IYORI & UESUGI, supra note 98, at vi-vii (During the history of monopolization and cartelization "[r]estrictive business practices were not conceived as unfair.... Unfairness from the viewpoint of equality or disparity did not bother the policy maker at the Government or the Diet.") (emphasis added). The OECD commented, "[I]n Japan's traditional approach to market competition, fair treatment has been as important as free processes. In all settings, the term 'competition' is typically accompanied by both 'free' and 'fair.' The competition agency has considered fair competition to be as indispensable as free competition. Widespread public concern to protect the value of fairness thus supports this aspect of the competition agency's actions." See OECD, REGULATORY REFORM IN JAPAN: THE ROLE OF COMPETITION POLICY IN REGULATORY REFORM 7 (1999).

(109) See OECD OBSERVER, POLICY BRIEF: COMPETITION LAW AND POLICY IN JAPAN 2, 6 (2004) ("[I]t appears the [J]FTC typically deals with large-firm abuse as unfair practices rather than private monopolization.... [T]he most common complaint that the [J]FTC receives is about excessive discounts (that is, competitors complaining about 'too much competition'.... Many cases about sales at prices that are 'unjustly' low, which are typically competitor complaints about rivals' price cutting. The surprisingly large number of [J]FTC actions about price cutting would not inspire confidence in consumers that competition enforcement is promoting their interests.") (emphasis added).

(110) See OECD, supra note 108, at 7, 12, 21 ("Principally because of concerns about growth, and secondarily because of concerns about fairness of market outcomes, other policies and interests have often trumped competition policy.... 'Free' is conjoined with 'fair'.... All of the rules (which focus on premium offers, labeling, wholesale-retail contract terms, newspaper pricing, textbook sales practices, competition and commercial terms in ocean shipping, and excessive lotteries) are, literally, about protecting competitors.") (emphasis added).

(111) See OECD, supra note 108, at 21.

(112) See Youngchun Baek, Randall Jones & Michael Wise, Product Market Competition and Economic Performance in Korea 5, 17 (OECD Economics Department Working Paper No. 399, 2004) ("The KFTC designates the firms that are subject to special regulation because of their size, enforces rules governing the structure of holding companies, limits total shareholdings outside a designated group and cross-holdings within it, limits loan guarantees within a group, restricts how financial affiliates in a group can vote shares, and polices 'undue' transactions within a group.... [I]n the 2003 designation, there are 17 'type A' chaebol that are subject to a ceiling of total shareholding in other domestic companies ..., and 49 'type B' chaebol that are subject to controls on cross-shareholdings and debt guarantees.").

(113) Indeed, the OECD found that regulating "undue intra-group transactions [is] the most important aspect of chaebol regulation, and it also is most closely related to conventional conceptions of competition law." Id. An analogy is made to state aid subsidies, because a member firm within the chaebol group that otherwise would have to exit the market is kept alive by affiliated firms. The anticompetitive impact as a result entrenches inefficient firms and bars "entry of potentially more competitive small ones." Id.

(114) See id. at 17, 18 ("Suspicious intra-group transactions may involve unfairness or something like predation, but more often the real problem is misappropriation, breach of fiduciary duty, or embezzlement. KFTC enforcement may fail where they aim at corporate misconduct that is not actually anticompetitive. Meanwhile, the new laws and institutions for dealing with corporate misconduct could remain underdeveloped as long as the KFTC is occupying the field.... The KFTC was more independent and effective than the existing financial regulators...."). Dealing with the credit card problems, the KFTC actually sought to limit competition, because it thought excessive competition could jeopardize financial stability. Id. at 18, 19.

(115) See Hugo Restall, Book Review: Getting More for Less, a Survey of Inefficiency ... and What to Do About It, ASIAN WALL ST. J., July 2-4, 2004, at 7 (reviewing WILLIAM LEWIS, THE POWER OF PRODUCTIVITY: WEALTH, POVERTY AND THE THREAT TO GLOBAL STABILITY (2004)); see also Christian Oliver, Chaebol Pulled into "Tofu War" as Seoul Backs Small Companies, FIN. TIMES, July 19, 2011, at 4 (noting that plans to exempt some small and medium-sized enterprises and some sectors from competition have angered Korean conglomerates).

(116) To be sure, even grounding in economics does not necessarily suggest favoring the consumer welfare thesis.

(117) See David Samuels, KFTC: The Bundedskartellamt of Asia?, 7 GLOBAL COMPETITION REV., June 1, 2004, at 26.

(118) Id.

(119) See Wentong Zheng, Transplanting Antitrust in China: Economic Transition, Market Structure, and State Control, 32 U. PA. J. INT'L L. 643 (2010), Xiaoye Wang, The New Chinese Anti-Monopoly Law: A Survey of a Work in Progress, 54 ANTITRUST BULL. 579 (2009), and Nathan Bush & Yue Bo, Disentangling Industrial Policy and Competition Policy in China, ANTITRUST SOURCE, Feb. 2011, at 1.

(120) See Paul Sonne & Laurie Burkitt, China Slams Unilever over Price Plan: Government Fines Consumer-Goods Company for Discussing Increases as Inflation Worries Grow Amid Soaring Costs, ASIAN WALL ST. J., May 9, 2011, at 18; Editorial, Decision Time on the Yuan, ASIAN WALL ST. J., June 16, 2011, at 11 (suggesting that China's fixed exchange rate policy creates inflationary pressure, that the Chinese government has "asked 17 industry associations to commit their members not to raise prices," and that Unilever's fine of RMB 2 million for violating this rule was "an offense labeled 'disturbing market order'....").

(121) See Rebecca Buckman, Beijing Antitrust Plans Worry Foreign Firms: As Law is Being Drafted, State Competition Report Criticizes Microsoft, Kodak, ASIAN WALL ST. J., June 11, 2004, at A1-A2.

(122) See Eleanor M. Fox, In Search of a Competition Law Fit for Developing Countries (N.Y.U.L. & Econ. Res. Paper No. 11-04, Feb. 14, 2011), available at

BY LAWRENCE S. LIU, Executive Vice President, China Development Financial Holdings Corporation and, concurrently, Adjunct Professor, Soochow University Law School and National Taiwan University Management School, Taipei, Taiwan. The usual disclaimers apply.
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Title Annotation:Trusting Antitrust: Tracing the Global Embrace of Antitrust Laws
Author:Liu, Lawrence S.
Publication:Antitrust Bulletin
Date:Jun 22, 2012
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