US embassy cable - 04TAIPEI3961

UNCLAS SECTION 01 OF 03 TAIPEI 003961 
 
SIPDIS 
 
STATE PASS TO AIT/W, DOJ, AND USTR 
 
STATE FOR EAP/RSP/TC 
 
DOJ FOR DELRAHIM 
 
USTR FOR KI/FREEMAN 
 
E.O. 12958: N/A 
TAGS: KIPR, ECON, ETRD, TW 
SUBJECT: Bilateral Consultations on Competition Law and Antitrust Seminar 
 
 
Summary 
------- 
1.  (U) In order to share information and open channels for 
future cooperation on antitrust issues, AIT and the US 
Department of Justice met with officials from the Taiwan 
Fair Trade Commission (TFTC) in Taipei, November 15-16.  DOJ 
and TFTC officials compared antitrust developments in the US 
and Taiwan and committed to establish an intellectual 
property rights (IPR) and competition working group under 
the auspices of AIT and TECRO.  In a separate session, which 
included private US attorneys as well as other Taiwan 
agencies and academics, the two sides gave presentations on 
the importance of antitrust enforcement to economic 
development. DOJ also participated in a competition law 
seminar hosted by the US-Taiwan Business Council and the 
Taiwan Semiconductor Industry Association (TSIA). End 
Summary. 
 
DOJ Focuses on Increasing Penalties While Providing Amnesty 
--------------------------------------------- -------------- 
2.  (U) On November 15, 2004 Deputy Assistant Attorney 
General Makan Delrahim, Special Counsel Stuart Chemtob, and 
DOJ Attorney Andrew Finch met with TFTC representatives for 
3 hours of consultations at TFTC headquarters.  The U.S. 
presentation focused on a dual approach of simultaneously 
increasing penalties for cartel behavior and the benefits of 
the amnesty program. DOJ reported that the US has increased 
the maximum penalty from 3 years in jail to 10 years in jail 
and the maximum criminal fine from US$10 million to US$100 
million. The amnesty program, which offers amnesty to the 
first company from a cartel that comes forward with 
information, now also provides for reduced civil penalties 
for amnesty recipients. The amnesty program is the single 
most effective tool for breaking up cartels.  Mr. Delrahim 
also stressed that an effective antitrust policy should not 
discriminate based upon nationality.  He cited several 
examples of US companies investigated by DOJ for 
anticompetitive practices against foreign firms. 
 
Taiwan Still Developing its Antitrust Enforcement Program 
--------------------------------------------- ------------ 
3.  (U) Taiwan is also exploring an amnesty program and 
expressed interest in the lessons learned from the DOJ, but 
TFTC Chairman Hwang Tzong-Leh noted that TFTC does not share 
the US DOJ's ability to prosecute antitrust violators.  This 
limits TFTC's ability to put pressure on and negotiate deals 
with violators.  Taiwan's amnesty law is still being 
discussed in the legislature. TFTC Vice Chairman Chen Chi- 
yuan stated that TFTC's focus over the next three years 
would be examination of enforcement procedures and 
legislation in order to create a consistent enforcement 
policy. He pointed out that this is necessary because Taiwan 
has a very short antitrust law history compared to the US. 
Chairman Chen also mentioned that Taiwan prefers to educate 
the business community rather than regulate them. He 
particularly stressed that dissemination of information in 
forums such as seminars are as important as enforcement 
actions. 
 
4.  (U) The two groups also discussed their different 
procedures for evaluating mergers.  In 2002 Taiwan amended 
the requirement that two firms intending to merge submit a 
pre-merger application. Now, they require a pre-merger 
notification, meaning that if TFTC does not request more 
information within 30 days, the merger would be 
automatically approved.  TFTC's policy also uses market 
share as a benchmark for determining which merger 
applications will require more requests for information. 
When Chemtob questioned this policy, TFTC responded that 
other measures such as assets and sales volume are absolute 
numbers and do not reflect the relative nature of 
monopolies.  TFTC prefers flexible standards that promote 
competition. Chemtob stated DOJ also prefers flexible 
standards that promote competition, but does not consider 
market share to be the primary determiner of anticompetitive 
practice. TFTC asked DOJ whether it placed a greater 
priority on a short time frame for evaluating merger 
applications in order to improve efficiency or on accuracy 
of the data in order to catch more offenders. They also 
asked whether DOJ used a large database of information to 
evaluate which cases constituted compliance problems.  DOJ 
responded that it evaluates mergers on a case-by-case basis. 
Out of 1454 merger notifications in FY 2004, it had to 
scrutinize only about 75 cases, and only in 15 cases (one 
percent) did they issue a second request for information. 
 
Agreement to Establish IPR and Competition Working Group 
--------------------------------------------- ----------- 
5.  (U) Mr. Delrahim proposed establishing an intellectual 
property and competition working group with the TFTC in 
order to help it distinguish IPR rights from anti- 
competitive practices, based on sound economic policy.  He 
said that DOJ has already established working groups with 
the Japan Fair Trade Commission (JFTC) and the Korea Fair 
Trade Commission (KFTC).  Delrahim proposed establishing a 
similar dialogue with Taiwan to include issues such as 
standard setting and unilateral refusals for licensing.  He 
suggested that the working group include both economists and 
attorneys.  Chemtob said the  US Federal Trade Commission 
would participate in the working group.  Vice Chairman Chen 
agreed  that a working group would be an important venue to 
exchange ideas in the IP and competition area and to receive 
advice from DOJ.  He stated that the International 
Competition Network (ICN) was also a good forum to discuss 
issues such as these, as the US and Taiwan are both members. 
 
Seminars Highlight Need for Antitrust Education in Taiwan 
--------------------------------------------- ----------- 
6.  (U) The afternoon session on November 15 was open to 
officials from several Taiwan ministries as well as 
professors and students from local Universities.  DAAG 
Delrahim spoke about the antitrust enforcement priorities in 
the United States, citing cartels as the highest priority, 
followed by mergers, and lastly, monopolistic behavior.  He 
stressed the importance of international cooperation in 
anti-cartel enforcement and praised the establishment of the 
ICN and intellectual property and competition working groups 
to promote convergence on policy and enforcement.  The 
audience asked why Taiwan, which had much smaller companies 
than the US, should be worried about antitrust issues.  Mr. 
Delrahim explained that antitrust investigation should be 
primarily concerned with preserving the competitive 
environment, not the size or even the market share of the 
firms involved. 
 
7.  (U) Commissioner Yu said that the Taiwan Fair Trade Law 
distinguishes anti-trust issues, such as mergers and 
monopolies, from unfair competition issues, such as false 
advertising, illegal multilevel sales, fraud, and 
counterfeiting.  In the last 12 years Taiwan has handed out 
over NT$1.3 billion in fines and has punished over 3,666 
companies.  He reiterated the TFTC view that punishment 
should not be the primary tool.  Taiwan instead favors 
education, through universities, mass media, and information 
dissemination to the companies so that they can effectively 
self-regulate. 
 
8.  (U) The US-Taiwan Business Council and TSIA organized 
presentations to industry representatives November 16 in 
Hsinchu. The key points discussed included cooperation 
between governments on investigations, which DOJ praised, 
and the inconsistency of penalties and time frame for 
investigations, which private firms complained about.  The 
private attorneys also raised questions about how patent 
pools (groups of companies combining large numbers of 
related patents for licensing arrangements) were hindering 
smaller firms from innovating and, conversely, how patent 
"trolls" (companies who buy up large numbers of patents 
without intending to market them and then sue when another 
company markets a product, allegedly based on such patents) 
were hindering innovation by larger firms.  In the last 
session, companies asked how they could protect themselves 
from antitrust suits. Finch stressed that an effective 
compliance program must communicate the severity of possible 
penalties for anti-competitive activity, before it starts to 
occur. 
 
Conclusion 
------- 
9. (U) This conference built on the relationship established 
by last year's meetings in Washington.  TFTC appreciated the 
opportunity to personally discuss the development of 
Taiwan's enforcement program with DOJ.  More importantly, 
they were able to establish a channel for regular 
communication between Taiwan and US officials. The public 
seminars directly addressed TFTC's focus of educating firms 
about antitrust laws rather than regulating them. 
Participants agreed that this kind of education program 
would help prevent compliance problems in the future and 
requested more education programs on this relatively new 
area of Taiwan law. 
Paal