Investigation on whether the relevant business operators were in violation of the Fair Trade Law concerning the imbalance of supply and demand for domestic granulated sugar in early 2004

Chinese Taipei

Case:

Investigation on whether the relevant business operators were in violation of the Fair Trade Law concerning the imbalance of supply and demand for domestic granulated sugar in early 2004

Key Words:

illegal stockpile, hoard, imbalance of supply and demand

Reference:

Fair Trade Commission Decision of March 24, 2005 (the 698th Commissioners’ Meeting)

Industry:

Granulated Sugar Manufacturing (0861)

Relevant Laws:

Articles 10 and 24 of the Fair Trade Law

Summary:

1. Due to the price-hike in early 2004, this Commission had continually received reports from the public, the relevant organizations, and business operators. Therefore, this Commission initiated the investigation on Taiwan Sugar Corporation (hereinafter referred to as “Taiwan Sugar”), the relevant importers, and major sugar businesses.
2. Upon the investigation, this Commission found that:

   (1) Facts regarding Taiwan Sugar:

   • In early August 2003, Taiwan Sugar reported the increment of domestic demand for granulated sugar and the possible insufficiency of stocks to the competent authority, Ministry of Economic Affairs. Taiwan Sugar requested for permission to import material sugar with low tariff duties to cope with said situation. However, due to the lack of legal basis, the aforesaid request was denied by the Executive Yuan. Since said company is a government-owned enterprise, it is responsible for the balance of domestic supply and demand. If it had allowed the shortage of sugar, the price of sugar might have largely risen due to the short supply of sugar and the effect of panic buying by the end of 2003. In order to help the importers and sugar businesses to release their stocks and urge businesses and the public using sugar to purchase imported sugar, Taiwan Sugar raised the price of sugar first to ease the demand. Meanwhile, it also planned to lower the price after the private businesses released their stocks to solve the short supply of sugar as of the end of 2003. Further, by increasing the quota for import sugar in early 2004 in time, the short supply would be mitigated and the supply and demand would be stabilized. Therefore, Taiwan Sugar raised the price of sugar by NT$ 1.2 per kilogram in November 2003, and declared at the same time that the price would be lowered by NT$ 1.5 per kilogram on January 1st, 2004 for the high peak of demand for sugar by the Chinese New Year of 2004.
     
   • From January 1st to January 5th 2004, the sales amount of Taiwan Sugar was 13,879 metric tons, which was unusually high compared with that of the past few years. It was because that the businesses using sugar were not diverted to purchasing imported sugar. Moreover, the company could not fully cover the demand of the domestic granulated sugar market by itself since 205 thousand metric tons of low tariff-rate quota had been granted to the private importation in 2004. Therefore, it had to take the measure of quota supply from January 7, 2004: selling as much sugar as possible to businesses directly using sugar. The measure was intended to ease the impact of the short-term imbalance of supply and demand for granulated sugar by the Chinese New Year and to restrain dishonorable sugar businesses from hoarding sugar to raise the prices.
     
   • The aforesaid price adjustment from the end of 2003 to early January 2004 was an expedient adjustment. Also, although the sugar price of Taiwan Sugar was approximately the same as the international sugar price, the range of increment was only 21%. Additionally, Taiwan Sugar did not raise the price by the Chinese New Year in early 2004 along with the domestically insufficient supply for sugar or the price-hike of the international sugar price. On the contrary, it maintained the sugar price at NT$ 12.7 per kilogram and suppressed the domestic sugar price in favor of the businesses using sugar.

   (2) Facts regarding Taiwan Sugar’s downstream sugar businesses: Though few businesses had increment in stocks by the end of January 2004, most sugar businesses strategically cleared their stocks by the end of 2003 due to the impact of Taiwan Sugar’s expedient adjustment at the time. Therefore, large amount of granulated sugar with low cost was purchased during the beginning of 2004. The sales amount during the time did not decrease for this reason. The sales prices were not obviously higher than Taiwan Sugar’s list price. Also, each enterprise had different sales prices and range of price adjustments.

   (3) Fact regarding the importers: Since it was stipulated that the import under the increased quota may not arrive earlier than January 1st 2004 and because the duration of import quota shall be based on the actual unloading date and because of the customs clearance procedures, the winning bidder of the granulated sugar import quota could not import granulated sugar to supply the market in a timely manner, i.e., before January 5th 2004.

3. Resolution:

   (1)With regard to the fact that Taiwan Sugar raised the sugar price by NT$ 1.2 per kilogram during November 2003 and declared that the price would be lowered by NT$ 1.5 per kilogram on January 1st 2004, and that the company did lower the price on January 1st 2004 but employed quota supply on January 7th later on, this Commission found that such a measure was employed to steady domestic supply and demand and that the company did not exploit its market position. Therefore, there was no violation of the Fair Trade Law.

   (2) With regard to whether Taiwan Sugar’s downstream major sugar businesses and importers improperly hoarded, sold, or jointly drove up the prices of granulated sugar, it was hard to determine that said businesses violated the Fair Trade Law based on the current evidence.

Summarized by Lin, Chia-Hua
Supervised by Wu, Bi-Ju

Appendix:

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