Yu K'un Transportation Ltd. and others violated the Fair Trade Law by acting in concert to monopolize bulk light diesel transport business contracted out by Chinese Petroleum Co., Ltd.

Chinese Taipei


Case:

Yu K'un Transportation Ltd. and others violated the Fair Trade Law by acting in concert to monopolize bulk light diesel transport business contracted out by Chinese Petroleum Co., Ltd.

Key Words:

bulk light diesel fuel; concerted shipping delays; market division agreement

Reference:

Fair Trade Commission Decision of September 8, 1999 (the 409th Commissioners' Meeting); Disposition (88) Kung Ch'u Tzu No. 117

Industry:

Oil Refining (2310)

Relevant Laws:

Articles 14 of the Fair Trade Law

Summary:

  1. Case Background: Chinese Petroleum Co., Ltd. ( "Chinese Petroleum") contracted with outside suppliers to transport bulk light diesel fuel through an open tender invitation system beginning in 1990 because seven of its 11 business centers-Keelung, Taoyuan, Hsinchu, Taichung, Chiayi, Tainan, and Kaohsiung-did not have enough trucks. Yu K'un Transportation Ltd. ( "Yu K'un Transportation"), Chang Sheng Transport Ltd. ( "Chang Sheng Transport"), You Kuan Ground Transport Co. Ltd. ( "You Kuan Ground"), Kuo You Shipping Co., Ltd., ( "Kuo You Shipping"), Pi Cheng Transportation Enterprises Co., Ltd. ( "Pi Cheng Transportation"), and Hung Ch'ang Transportation Enterprises Co., Ltd. ( "Hung Ch'ang Transportation") won bids for contracts lasting 30 months. When the contract expired, the contract could be renewed once for a second 30 months if both parties so agreed, and Chinese Petroleum renewed the contracts accordingly in 1992. In 1995, the seven business centers issued a new invitation to tender. Yu K'un Transportation and the five other contractors won the bids again. In February and March 1998, the contracts successively came to term. Chinese Petroleum was planning to issue invitations to tender again, but some of the contractors obstructed the tendering process in hopes of renewing the contracts.
  2. With regard to the efforts to impel Chinese Petroleum to renew the transport contracts with its contractors and the attempt to coerce Chinese Petroleum into halting its invitation to tender: In February and March 1998, the transport contracts between Chinese Petroleum and the contractors successively came to term. To renew their contracts with Chinese Petroleum, the contractors agreed at business association gatherings to impel Chinese Petroleum to renew the transport contracts and to coerce Chinese Petroleum collusively into halting its call for tenders.

    2.1 The contractors acted in concert to delay shipments under the direction of He Shih-kuei, the de facto responsible person of Yu K'un Transportation, Ch'ang Sheng Transport, and the Shen Lai Co ("Shen Lai"). Shen Lai contacted managers at Yu K'un Transportation, Ch'ang Sheng Transport, and Kuo You Shipping and asked them to persuade oil truck drivers to delay shipments from Chinese Petroleum's Shihmen, Taoyuan, Wangt'ien, and Ch'iaotou depots.

    2.2 The contractors also lobbied elected officials through their business association to pressure Chinese Petroleum and thereby achieve their aims of obstructing the invitation to tender and renewing the contract.

    2.3 The contractors boycotted the 1998 light oil bulk transport invitations to tender. As a result, the invitations to tender fell through, and Chinese Petroleum was forced to withdraw the invitations in all districts except Hsinchu.

    2.4 When the contractors delayed shipments, they affected the normal operation of the Shihmen, Taoyuan, Wangt'ien, and Ch'iaotou depots. By agreeing not to bid and impelling Chinese Petroleum to halt its invitations to tender, the contractors delayed the selection of bidders at five operating centers until June 1998.

  3. With regard to the agreement to cede business territory and divide up the market: You Kuan Ground, through He Shih-kuei, originally planned to seize three territories outside of its home business zone. In January 1998, the two sides began talking about how to apportion business territories. The talks included an agreement to cede the Kaohsiung region to You Kuan Ground, and to transfer the lease on Shen Lai's parking lot in Kaohsiung to You Kuan Ground. You Kuan Ground also continued to employ all of Shen Lai company's former employees. Moreover, an investigation showed that although Hung Ch'ang Transportation Enterprises did not win a bid, it engaged in collusive bidding with You Kuan Ground. The investigation also showed that Hung Ch'ang Transportation's Wang Jung-chi and Kuo You Shipping's Hsiao Yin-huang and Chou Wu-san were part of the same interest group. The former had also participated in the agreement on dividing the market.

  4. In sum, competitor enterprises Yu K'un Transportation, Ch'ang Sheng Transport, You Kuan Ground, Kuo You Shipping, Pi Ch'eng Transportation, Shen Lai, Ch'en Min-hsing, and Yang Pi-lien agreed upon business territories in an effort to divide up Chinese Petroleum's light oil bulk transport business among themselves. They also impelled Chinese Petroleum to renew their contracts and coerced Chinese Petroleum into halting its invitations to tender. Moreover, Hung Ch'ang Transportation not only engaged in collusive bidding, but also in negotiations on agreements to cede business territories. The Fair Trade Commission's examination of these acts finds them in violation of the prohibitions of Article 14. Because the violations in this case occurred before the amended Law came into force on February 5, 1999, the Commission disposed the case in accordance with the fore part of Article 41 of the same Law in effect at the time of the acts.

Summarized by Hung Hsuan
Supervised by Li T'ing-hsi

Appendix:
Chinese Petroleum Co., Ltd.'s Uniform Invoice Number: 03707901
Yu K'un Transportation Ltd.'s Uniform Invoice Number: 07691612
Chang Sheng Transport Ltd.'s Uniform Invoice Number: 20829442
You Kuan Ground Transport Co., Ltd.'s Uniform Invoice Number: 22411219
Kuo You Shipping Co., Ltd.'s Uniform Invoice Number: 05961759
Pi Cheng Transportation Enterprises Co., Ltd.'s Uniform Invoice Number: 69627788
Hung Ch'ang Transportation Enterprises Co., Ltd.'s Uniform Invoice Number:66453101


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