Collusive practices among bottlers in the Hsinchu and Miaoli region
Case:
Collusive practices among bottlers in the Hsinchu and Miaoli region
Key Words:
bottlers, liquefied petroleum gas, bottled gas, collusive practices
Reference:
Fair Trade Commission Decision of April 7, 1999 (the 387th Commissioners' Meeting); Letter (88) Kung Er Tzu No. 8702600-010 dated April 20, 1999
Industry:
Gas Fuel Supply (4200)
Relevant Laws:
Articles 14 of the Fair Trade Law
Summary:
1. A retail gas seller anonymously filed a complaint that Pei Yi Hsing Yeh Co., Ltd. ( "Pei Yi" )'s T'ung Hsiao facility, Liu T'ung Industries Co., Ltd. ( "Liu T'ung Industries") of Hsinchu, and the Hsin Lun Bottling Co,. Ltd. ( "Hsin Lun Bottling") collusively raised the price of liquefied petroleum gas by NT$2 per liter.
2. When liquefied petroleum supply centers were regulated, the market was stable because the retail price in each region was fixed, a 1:27 ratio was maintained between bottlers and retail stores, new bottlers were restricted, and retailers were not allowed to choose bottlers freely. After the industry was privatized in 1996, exclusive distribution was also liberalized. In recent years, many new bottlers opened in the Taoyuan area, and the majority of these competed by slashing prices in the Hsinchu area so as to win new business. This caused the price of gas in the Hsinchu region to fall and affected market stability in the Miaoli region. To preserve profitability, the three bottlers in the Hsinchu and Miaoli regions not only agreed on product prices among themselves, but also made concerted efforts to prevent competing businesses from other regions from entering the Hsinchu-Miaoli region in order to secure the ability to decide prices among themselves.
3. The Fair Trade Commission investigated and found that after the liberalization of the liquefied petroleum gas industry in 1993 and Liu T'ung Industries' 1995 entry into the Hsinchu-Miaoli liquefied petroleum gas market in June 1995, competition between the region's three bottlers-Pei Yi, Hsin Lun Bottling, and Liu T'ung Industry-was intense. The price per liter fell from NT$15 to above NT$13, and the three bottlers competed from 1996 to early 1998. In early 1998, Pei Yi, Hsin Lun Bottling, and Liu T'ung Industries reached an agreement to restore pricing to NT$15.745 per liter, the price during the Vocational Assistance Committee for Retired Servicemen era. The three bottlers also agreed to not to lower prices to poach customers. This caused prices in the Hsinchu-Miaoli region to rise from above NT$13 to NT$15.745 and settle there beginning in March 1998. These practices constituted a barrier to liquid petroleum gas pricing in the Hsinchu-Miaoli region because they were intended to secure profits created by an artificial skewing of supply and demand. The Commission rules that these practices restricted competition in the market adversely and violated Article 14 of the Fair Trade Law, which prohibits concerted actions.
Summarized by Huang Ch'ung-chieh
Supervised by Tso T'ien-liang
Appendix:
Pei Yi Hsing Yeh Co., Ltd.'s Uniform Invoice Number: 86927084
Liu T'ung Industries Co,. Ltd.'s Uniform Invoice Number: 23779966
Hsin Lun Bottling Co,. Ltd.'s Uniform Invoice Number: 47240184