Companies slam Philips on high fees

Taiwan's recordable compact disc (CD-R) manufacturers plan to file an appeal with the Cabinet-level Fair Trade Commission (公平會) today, charging that Philips Electronics NV of the Netherlands has illegally monopolized the market, Chinese-language media reported over the weekend.

CD-R makers led by the Taipei Computer Association and the Taiwan Electrical and Electronic Manufacturers' Association have also sought assistance from lawmakers to schedule a meeting with related government officials tomorrow at the Legislative Yuan, the report said.

The manufacturers said the exorbitant fees have sharply increased their production costs and weakened their products' market competitiveness.

Earlier this year, the Fair Trade Commission ruled that Philips -- along with Japan's Sony Corp and Taiyo Yuden Co -- had violated Taiwan's fair trade law by acting jointly in CD-R patent licensing agreements and fined Philips NT$8 million (US$235,000). The commission also ruled that Philips is charging too high a fee for its technology transfer license and that it collects fees as if it were the sole holder of CD-R patents.

In response to being fined by the commission, Philips said in January that it would cancel a technology transfer license with Taiwan-based Ritek Ltd (錸德) to produce CD-Rs for use with personal computers and other electronic devices.

According to Ritek, a major domestic CD-R manufacturer, when the selling price of CD-Rs was US$3 to US$4 a piece, Philips charged each Taiwan CD-R manufacturer ?300 (US$2.72) each. Although Philips has significantly reduced the fee along with the decline in CD-R prices in the past year, the charges are still too high, the report said.

CD-Rs are between US$0.20 to US$0.25 each -- down from US$0.70 per unit in 1999. With Philips charging ?10 Japanese (US$0.083) each, the royalty fee accounts for 32 percent to 41 percent of a CD-R manufacturer's production costs, seriously affecting the product's competitiveness, the report said.

Meanwhile, Philips' application for tax exemption on CD-R royalties was rejected by the Industrial Development Bureau last week. According to Vice Minister of Economic Affairs Yin Chi-ming (尹啟銘), the Dutch-based consumer electronics giant was rejected because it did not complete the necessary documentation.

Philips denied the report, saying it has not yet received any formal notice from the Industrial Development Bureau. Executives from Philips said the application for tax exemption fully complies with Taiwan's tax rules.