A case involving the 2003 worldwide betel nut tariff quota import entitlements where successful bidders were accused of violating the Fair Trade Law by monopolizing the importation of betel nut in order to drive up prices
Case:
A case involving the 2003 worldwide betel nut tariff quota import entitlements where successful bidders were accused of violating the Fair Trade Law by monopolizing the importation of betel nut in order to drive up prices
Key Words:
betel nuts, tariff quota, tender
Reference:
Fair Trade Commission Decision of July 17, 2003 (the 610th Commissioners' Meeting); Dispositions (92) Kung Chu Tzu No. 092130, 092131, and 092132
Industry:
Fruit Producers (0115)
Relevant Law:
Article 19 of the Fair Trade Law
Summary:
1. This case is based on a complaint alleging violation of the Fair Trade Law and requesting a full investigation and clarification of the facts regarding the "Importation of Thai Betel Nuts" tender held by the Central Trust under the mandate of the Council of Agriculture. The complaint alleges that [the respondents], led by Jhang Ming-sian, first colluded to rig the tender using an organized plan and afterwards brought together the remaining successful bidders, using restrictive sales quotas to concentrate management organization in a corporate form to monopolize the market and drive up prices.
2. Results of the Fair Trade Commission (FTC) investigation:
Jane Branda Enterprise Co., Ltd. (Jane Branda) asked its downstream betel nut
wholesalers for a commitment to import Thai betel nuts from their company as
a condition of their assistance to help these downstream wholesalers to obtain
2003 worldwide betel nut tariff quota import entitlements. In addition, Jane
Branda used deceptive methods to obtain photocopies of business licenses from
other enterprises, subsequently participated in the tender under the names of
4 separate enterprises, and was granted betel nut tariff quota import entitlements
totaling 1153.5 metric tons, which constituted 17.4 percent of the 2003 total.
Furthermore, in an attempt to obtain more 2003 worldwide betel nut import tariff
quota import entitlements and control Chinese Taipei' s betel nut import market,
Lin Yi-tian obtained photocopies of business licenses from his close friends
for five other enterprises in addition to those of his own two enterprises.
He then participated in the tender under the names of those seven enterprises
and was granted a total of 2773.6 metric tones in 2003 betel nut tariff quota
import entitlements, which constituted 41.9 percent of the total amount of the
tender. In addition, NT$500,000 in shares was given to certain enterprises before
the tender as an incentive to participate, and after receiving the entitlement,
an additional "gratuity" of NT$20,000 was also provided. Furthermore, Jhang
Ming-sian participated in the tender under the names of three enterprises, and
as an incentive to participate in the tender, promised an additional risk management
fee equal to two percent of related revenues for associated enterprises of the
businesses whose names had been borrowed for the bid and through which later
customs declarations would be handled. A total of 2240 metric tones in 2003
betel nut tariff quota import entitlements was thus obtained, constituting 34%
percent of the total amount of the tender. After the tender was granted, Jhang
Ming-sian was responsible for transferring registration of all the betel nut
tariff quota import entitlement grants received by other enterprises under the
names of those aforementioned associated enterprises, to be coordinated and
managed by him.
3. Grounds for disposition:
According to the results of the FTC' s investigation, Jane Branda, Lin Yi-tian,
and Jhang Ming-sian, in exchange for certain conditions, or by offering shares
or other economic benefits, induced other enterprises to participate in the
tender. These acts and methods are, in themselves, inappropriate. In fact, by
participating in the tender under the names of several other enterprises the
respondents alone decided the dollar amount and quantity of the tender and damaged
fair competition, whose central elements include effective competition on the
basis of quality, price and service. In terms of commercial ethics, these are
reprehensible acts, creating unfair competition for other competitors. In addition,
the fact that the respondents had a controlling share of the import market decreased
the number of enterprises granted tariff quota import entitlements and increased
market concentration, and by importing smaller quantities during the low season
for domestic betel nut production, they could effectively drive up the price
of imported betel nuts. Furthermore, by controlling the tariff quota import
entitlements the respondents could refuse to import and also drive up the price
of domestically produced betel nut, thus affecting the supply and demand functions
of Chinese Taipei' s imported betel nut market. This is an obvious attempt to
gain unlawful benefit, which impaired the overall competitiveness of the market
and essentially limited fair competition. Consequently, Jane Branda, Lin Yi-tian,
and Jhang Ming-sian, by leading and inducing enterprises to participate in the
tender, violated Article 19(iv) of the Fair Trade Law, causing others to participate
in concerted action through improper means and affecting the supply and demand
functions of Chinese Taipei' s imported betel nut market. In conclusion, after
weighing such factors as the motive and purpose behind these illegal acts, the
expected improper gains, the degree of damage to the trading order and their
market position, the FTC imposed respective administrative fines of NT$1 million,
$1.8 million, and $1.5 million on Jane Branda, Lin Yi-tian, and Jhang Ming-sian.
Appendix:
Jane Branda Enterprise Co., Ltd.' Uniform Invoice Number: 84585463
Summarized by Hsu, Cho-Yuan; Supervised by Cheng, Chia-Lin