A Study of Restrictive Competition Practices In the Domestic Cement Market

【Abstract】

On the basis of the core value of competition policy, the first and foremost task and mission of the competent authority of each country is to eliminate the concerted and monopoly actions, maintain market mechanism, so as to promote economic stability and prosperity. However, for an oligopoly market and products that are more homogenous, the enterprises are often seen of relying on various concerted actions to avoid cut throat competition that leads to a price war and using various practices to restraint competition in order to attain the intended market goal, the so-called “stable” market goal in the process of industry development. As a result, the market prices of the relevant products are often high and not falling, the market is affected greatly. This phenomenon is not only found in the domestic cement market, the cartel of international cement market seems to have gradually expanded to every corner of the world, even to the East Asian region, a region that we located. Due to the fact that it is difficult to gather direct evidences of an enterprise having engaged in concerted actions, and thus the question of how the indirect evidences can be used to confirm the truth has become a common problem for the competent authorities of countries that have implemented competition law when supervising the competition practices of an enterprise.

Taking the Domestic cement industry as an example, after the Fair Trade Commission receives a complaint, in order to be able to handle and correct the case of violation, the Fair Trade Commission must conduct comprehensive study and in-depth investigation on development and market condition of the said industry. Therefore, after a long period of observation on the conducts of cement enterprises in the Domestic cement market, this study is conducted to explore the interrelations of oligopoly market structure and characteristics, means of collusion used by the industry and the forms of restrictive competition practices in order to explain the failure of market competition mechanism in the said industry so that the Fair Trade Commission can conduct investigation and render decision immediately, effectively and appropriately at the time handling the relevant cases.

This study began with the description of domestic cement market development, product characteristics, production and marketing structure. First, the conceptual understanding for the industry is made in the study of cement market development, after that, based on the economic theory of oligopoly market, the performance of domestic cement industry in different market structure and under the fair and restricted market competition is analyzed with the relevant economic theoretical model. Then, the game theory is used to analyze the equilibrium of tacit collusion that has economic meaning in the Competition Law.

This study analyzed the impact of international cement market’s cartel on domestic cement market and their relations. An empirical investigation of restrictive competition practices in domestic cement market was conducted to verify the aforementioned models. This study explored concerted action, one of the important topics of discussions, that is stipulated in the Competition Law. At last, this study analyzed relevant cases that have been handled by the Fair Trade Commission in recent years. The following important suggestions are presented for the findings of this study that further can be referred to by the Fair Trade Commission, the relevant government agencies and the industry. The relevant suggestions are summarized as follows:

1. The leading role of international cement market and its active engagement in international cartel are regarded as cross-border. As there is a restriction on the scope that every country may exercise its jurisdiction; hence the question of whether there is an international competition agency and cooperation among the countries have become the important factors to determine the success of cracking down international cartel.
2. The Fair Trade Commission’s investigation found that international cartel has already formed and the trend continued in the East Asian cement market. The domestic cement companies have jointly controlled the important centers and facilities for imported cement (the cement storage at ports). Therefore, unless any of the aforementioned restrictive competition measures or conditions can be removed, otherwise the anti-dumping duties that are levied on cement imported from the Philippine and Korean seems meaningless, and furthermore, the free competition of the domestic cement market will also be restrained. The relevant government agencies should carefully evaluate and review the possibility of stop levying anti-dumping duty on cement imported from the Philippine and Korea, so as to remove tariff barriers and promote fair competition in domestic cement market.
3. The cement industry is a capital-intensive and high-energy consumption industry, coupled with the scarcity of mine resources; the domestic cement market has been an oligopoly market for a long time. Before the domestic cement companies have agreed with this concerted action; the pre-mixed concrete companies, enterprises not affiliated to cement companies, still have choice between domestic or imported cement. However, after the domestic cement companies have engaged in concerted actions, the pre-mixed concrete companies are, either unable to acquire cement or even in the case of able to acquire imported or domestic cement, the price of cement has increased substantially; their operations and existence are compressed. And, after the domestic cement companies have acquired excess profits from vertical sales, they will cross-subsidize their subordinated or affiliated pre-mixed concrete companies that lead to unfair competition in the downstream industry, also, there is a tendency of accelerating the process of pre-mixed concrete industry being concentrated or conglomerated. Therefore, the Fair Trade Commission will continue to command and understand the tendency of this development, as one of the indicator to monitor the domestic cement companies for any monopolization behaviors.

Researcher: Tso, Tien-Liang
Hsieh, Hsiu-Lin
Liu, Chin-Chih
Yang, Chia-Hsien