Taiwan Automobile Co., Ltd., covertly pre-selected the contractor when calling for tenders for provision of bus seat covers. This was an obviously unfair act in violation of the Fair Trade Law
Case:
Taiwan Automobile Co., Ltd., covertly pre-selected the contractor when calling for tenders for provision of bus seat covers. This was an obviously unfair act in violation of the Fair Trade Law
Key Words:
Taiwan Automobile Co. Ltd.; bus seat-cover fabric; covert pre-selection of contractor, obviously unfair act
Reference:
Fair Trade Commission Decision of August 11, 1999 (the 405th Commissioners' Meeting); Disposition (88) Kung Ch'u Tzu No. 113
Industry:
Automotive Passenger Transport Industry (6113)
Relevant Laws:
Summary:
1. It was alleged that Taiwan Automobile Co., Ltd., ("Taiwan Automobile") rigged the specifications in its calls for tenders for provision of seat-covers for 1989 and 1992 Kuo-kuang model buses. The Fair Trade Commission (FTC) investigated the case by asking the informant, Taiwan Automobile, a number of related parties, and the China Textile Institute to submit written and in-person reports to the FTC. The FTC found the following: Around 1983 Taiwan Automobile's machine fabrics plant bought cotton flannel and then called for tenders for its processing into finished seat covers. As the employees who handled the tendering did not understand the makeup of cotton flannel, they asked Chin Hua Co. ( Chin Hua) to provide them with a sample and specifications. Although Chin Hua claimed that Taiwan Automobile had submitted the sample to the China Textile Institute for testing and then set the specifications for its cotton flannel according to the Chinese National Standard (CNS), the FTC made a comparison and found that that Taiwan Automobile was basically using the cotton flannel manufactured by Chin Hua as its model.
2. A comparison of the statements Chin Hwa made at the FTC and an internal memo from Taiwan Automobile show that beginning in 1983 Taiwan Automobile set Chin Hua's production equipment (Double-spindle loom and W weave) and product specifications as the standard for bidding vendors. At that time, domestic vendors with the requisite manufacturing capabilities included Fu Chi Co., Lung Hsien Co., Te Yi Co., and Chin Hua, but Taiwan Automobile had early on divided its cotton flannel purchasing into smaller tender cases, and Fu Chi Co. and Lung Hsien Co., which had larger business volumes, refrained from bidding out of production cost considerations except in cases involving large purchase amounts. Moreover, Taiwan Automobile often made partial emergency purchases from Chin Hua before calling for tenders. Since bidding companies had to deduct the amount of the fabric that Taiwan Automobile had already purchased from Chin Hua, no bids would be submitted and Chin Hua would win the tendering. If when calling for tenders an enterprise takes a particular enterprise's production equipment and product specifications as the specifications and standards required of prospective bidders, the enterprise calling for tenders is, in effect, selecting the contractor. This act may obstruct trade opportunities for other substitute products and is an obviously unfair act capable of affecting the trading order for vendors of related products regardless of whether it is intentional or an oversight.
3. The FTC also reviewed Taiwan Automobile's tender files. The first call for
tenders had a tender period of 13 days. The second call for tenders had a tender
period of 13 days in its first announcement, and only 4 days in its fifth announcement.
All of these tender periods were in clear violation of the third item in the
"Points for Attention in Calls for Tenders on Public Construction Projects
by the Executive Yuan and its Subordinate Agencies," which stipulates that
the tender period "shall not be less than 14 days for an ordinary engineering
project, and may be reduced to 7 days in subsequent calls for tenders on the
same project." The China Textile Institute and most of the enterprises
that submitted bids criticized as highly inappropriate Taiwan Automobile's use
of a double-spindle loom as a restriction in the specification. If, as the Chinese
Textile Institute proposes, new enterprises require a two to three month operation
schedule, then Taiwan Automobile's tender periods and delivery dates are obviously
unfavorable to new enterprises entering the market.
4. In sum, Taiwan Automobile in effect covertly determined the vendor when it
used China Hua's production facilities and product specifications as the specifications
and standards in its calls for tenders. By not only covertly determining the
vendor, but also violating the regulations regarding tender periods in the "Points
for Attention in Calls for Tenders on Public Construction Projects by the Executive
Yuan and its Subordinate Agencies," Taiwan Automobile obstructed trade
opportunities for other substitute products and market entry by vendors of related
products. These were obviously unfair acts capable of affecting trading order,
in violation of the prohibition in Article 24 of the Law. The FTC disposed the
case in accordance with the fore part of Article 41 of the same law in effect
at the time of the act.
Summarized by Hou Wen-hsien
Supervised by Shih chin-ts'un
Appendix:
Taiwan Automobile Co., Ltd.'s Uniform Invoice Number: 52594496