The purpose of this study is to apply the theory of industrial organization to examine the competitive nature, business conduct characteristics and market performance of Taiwan motorcycle industry. The policy implications of Fair-trade Law regarding to the operation of this industry are also discussed. How market structure and market conduct affecting the market processes as well as operational performance under the operation of motorcycle industry are main issues in this study. The procedure of this analysis consists of three steps: 1. Identifying market characteristics of the industry by suing the index of market share, concentration ratio, product differentiation, etc; 2. Discussions of market conduct variables including pricing, marketing channel decision-making behaviors of advertising, franchise agreement, excess capacity and technological innovation; 3. Analyzing the market performance on this industry; 4. Explaining the involvement of Fair-Trade Law to the operation of this industry. The analytical results have indicated that the market power or market imperfection would affect not only the behaviors of competing firms but also the performance of the entire market. Market concentration ratio related to the identification of monopoly position, barrier of excess capacity, behaviors of exclusive dealing with franchise agreement, resale price maintenance, advertising which involved in the context of Fair-trade Law might be regulated. Therefore, to achieve the effective competition and to improve the operational performance of this industry, it first needs adjustments of business management strategies, otherwise, government policies should be involved.