Application for companies to engage in a concerted action to lower the production volume of man-made and synthetic fiber by their respective industry associations

Chinese Taipei


Case:

Application for companies to engage in a concerted action to lower the production volume of man-made and synthetic fiber by their respective industry associations

Key Words:

concerted act to lower production

Reference:

Fair Trade Commission Decision of January 14, 1999 (377th Commission Meeting); Letters (88) Kung Er Tzu No. 8714023-001, 002

Industry:

Synthetic Fiber Spinning (1313) and Synthetic Fiber Processed Thread (1314)

Relevant Law:

Article 14(6) of the Fair Trade Law

Summary:

  1. The Taiwan Man-made Fiber Industries Association and the Taiwan Synthetic Texturize Industry Association, on behalf of their member companies, pursuant to Article 14(vi) of the Fair Trade Law (FTL), applied to the Fair Trade Commission (this Commission) for permission to engage in a concerted act to lower the production volume of polyester thread by more than 20% and that of polyester processed thread by 10% to 15% over a period of one year upon the date of approval.
  2. Article 14 of the FTL stipulate that “enterprises shall not act in concert; provided, this shall not apply in the following circumstances where the activity is beneficial to the overall economy, is in the public interest, and has been approved by the central competent authority:” where “in times of an economic downturn, if the market price for products is lower than average production costs such that the industry concerned is having difficulty maintaining itself, or if there is overproduction, concerted acts that limit production, facilities or prices for the purpose of a planned response to meeting market demands.” Although the domestic economy is presently undergoing a period of economic downturn, based on the considerations that follow, this Commission believes that the market mechanisms of related industries are still able to operate, and there is no way to prove conclusively that exceptional permission of this concerted action to lower production volume meets the condition of “where the activity is beneficial to the overall economy” and “is in the public interest.” Therefore, approval was not granted pursuant to Article 14 of the FTL.
    1. According to information from October 1995 to October 1998 provided by these industry associations, market demand and sales volume of these industries had never declined and, in terms of growth, the companies’ inventories had not increased by a large margin; and
    2. According to estimates based on statistical information from January 1992 to October 1998 provided by government agencies, increases in companies’ excess inventory volume (total inventory volume less the amount of inventory necessary under normal operating conditions) were limited as the companies could respond independently and on their own accord with adjustments to their production volumes.

  3. These two industry associations, believing that conditions in the economy and industry had changed in February 1999, filed another application with this Commission pursuant to Article 14(vi) of the FTL. However, the two industry associations later indicated in separate letters that as supply and demand in the market had improved slightly in April 1999, the companies could respond on their own account by adjusting production volume, making a concerted action to lower production volume unnecessary. In the 290th Commission Meeting on April 28, 1999, the Commission agreed to the withdrawal of the application.

Summarized by Ma Ming-ling
Supervised by Shi Chin-tsun


**: For information of translation, click here