Sixteen gas shops in Hsichih raised household bottled gas prices in concert
Case:
Sixteen gas shops in Hsichih raised household bottled gas prices in concert
Key Words:
concerted price increase, bottled gas, retailers
Reference:
Fair Trade Commission Decision of October 6, 1999 (the 413th Commissioner's Meeting); Letter (88) Kung Er Tzu No. 8809998-001 dated October 9, 1999
Industry:
Gas Fuel Supply (4200)
Relevant Laws:
Summary:
1. Three consumers, Mr. Huang, Mr. Liu, and Mr. Wu, filed a complaint that five bottled gas retailers, Ning Yang, Hsin P'ing Gas Ltd., Hung Pen Gas Shop, Nan Mei, and Wen Hsing Gas Shop Ltd. ("Wen Hsing"), had raised prices in concert in Hsichih. Subsequently, a Hsichih resident filed a complaint anonymously and Ch'en Chen, a consumer, wrote to the "Premier's Electronic Mail Box" to the effect that he suspected Hsichih area gas retailers of acting in concert to raise prices to a uniform level. In brief, the price of 16-kilogram and 20-kilogram bottled gas had risen throughout Hsichih within one or two days between mid-April and May 1999. The price of 16-kilogram bottles had risen from NT$340 to NT$410 while the price of 20-kilogram bottles had risen from NT$410 to NT$510.
2. The Fair Trade Commission investigated and found that the Hsichih area gas market could support economies of scale due to a high concentration of customers. There were 16 gas shops: Ch'ang Hsing Gas Shop, Hsin An Liquefied Gas Ltd., Kuo Chu Enterprises Ltd., Hsiang Hsing Gas Ltd. ("Hsiang Hsing Gas"), Chi Hui Gas Shop Ltd . ("Chi Hui Gas"), Liang Ke Enterprises Ltd., An Li Gas Shop Ltd ( "An Li")., Tung Fan Gas Shop Ltd., Yi Fu Enterprises Ltd., Hsieh Hui Liquefied Gas Ltd., Hsin P'ing Gas Ltd., Wen Hsing Gas Shop Ltd., Hung Pen Gas Shop, Mei Pen Gas Ltd., Ta Yu, and Chia Mei Enterprises Ltd. ("Chia Mei"). In 1996, prices at one point fell to NT$300/20-kilogram bottle because unlicensed shops An Ch'uan, Ning Yang, Nan Mei, and Fu Hsian had slashed prices. Between 1997 and early April 1999, business customers paid NT$380 to NT$400 per 20-kilogram bottle while household customers paid NT$450 to NT$460. This was relatively cheap when compared with the more than NT$500 household customers were paying per bottle in neighboring Keelung, Nankang, and Neihu. On April 12, 1999, Mr. Wei Yung-han of Hsiang Hsing Gas and Mr. Li Sheng-lung of Chi Hui Gas assembled the 16 Hsichih area gas retailers at the Mt. Ta Chien Seafood Restaurant at the foot of Mt. Hsiu-feng in Hsichih. There they reached a consensus on pricing whereby they would charge household customers NT$510 per 20-kilogram bottle and NT$410 per 16-kilogram bottle; business customers were to be charged NT$480 per 20-kilogram bottle. The retailers gave a number of reasons for the price increase: their long-term lack of profitability, destructive price competition, Chinese Petroleum's license fee increase . Other reasons included the pricing gap between Hsichih and Keelung, Nankang, and Neihu, the desirability of returning to the prices before the price war, and the need to reasonably reflect basic costs.
3. Of the 16 gas shops in this case, 14 were licensed. Two unlicensed gas shops, Chia Mei and Ta Yu, were horizontal competitors. Nine of the retailers in attendance agreed to implement the pricing consensus. The other six retailers neither objected nor abided by the agreement fully after the meeting. According to the definition of concerted action set forth in Article 7 of the Fair Trade Law ("the Law"), consent is all that is needed to constitute concerted action. One does not actually need to implement the content of an agreement for a violation to occur. An Li attended the meeting, agreed to increase prices, but then objected to the increased price. After the meeting, An Li raised its prices to NT$500/20-kilogram barrel, one day later and NT$20 cheaper than its peers. Although An Li's timing and pricing were inconsistent, the Commission finds that it had reached a meeting of the minds with its peers with whom it was competing because it attended the meeting and took the opportunity to raise its prices. This is already sufficient to result in concerted action; the same disposition is made in the case of An Li.
Summarized by Liu Chin-chih
Supervised by Tso T'ien-liang
Appendix:
Hsin P'ing Gas Ltd.'s Uniform Invoice Number: 39064023
Liang Ke Enterprises Ltd.'s Uniform Invoice Number: 39050914
Chi Hui Gas Shop Ltd.'s Uniform Invoice Number: 39157211
Hung Pen Gas Shop's Uniform Invoice Number: 39057212
Mei Pen Gas Ltd.'s Uniform Invoice Number: 33864012
Wen Hsing Gas Ltd.'s Uniform Invoice Number: 39010218
Hsiang Hsing Gas Ltd.'s Uniform Invoice Number: 33863941
Yi Fu Enterprises Ltd.'s Uniform Invoice Number: 39114038
Hsieh Hui Liquefied Gas Ltd.'s Uniform Invoice Number: 39084837
Ch'ang Hsing Gas Shop's Uniform Invoice Number: 33874969
An Li Gas Shop Ltd.'s Uniform Invoice Number: 39040212
Kuo Chu Enterprises Ltd.'s Uniform Invoice Number: 39131965
Tung Fan Gas Shop Ltd.'s Uniform Invoice Number: 39064115
Hsin An Liquefied Gas Ltd.'s Uniform Invoice Number: 39159750
Chia Mei Enterprises Ltd.'s Uniform Invoice Number: 16389549