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:
- 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.
- 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.
- 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
- 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.
- 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
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