Allegations by a white meat poultry farm operator that prices for white meat chicks were being manipulated

Chinese Taipei


case:

Allegations by a white meat poultry farm operator that prices for white meat chicks were being manipulated.

Key Words:

Concerted price fixing

Reference:

Fair Trade Commission Decision of June 7, 2000 (the 448th Commissioners' Meeting); Letter of 19 June 2000 (89) Kung Yi Tzu No. 8814089-013

Industry:

Poultry raising (0133)

Relevant Laws:

Article 14 of the Fair Trade Law

Summary:

The Fair Trade Commission (the "Commission") received a letter of complaint from the operator of a white meat poultry farm. According to the complainant, the prices for white meat chicks in the past had been set by the market to reflect costs. In recent years, however, the Poultry Association of Chinese Taipei [sic] ("Poultry Association") had engaged in concerted action to control the prices by collecting funds for a foundation through its White Meat Chick Group.

The Commission reviewed and investigated the poultry production and trading process, the pricing of chicks in recent years, and the causes of fluctuations and trends therein. The Commission also investigated whether poultry operators had collected funds from one another. The Commission also solicited the opinions of the competent authority for agriculture in a written request for further information. The case was decided at the 448th Commissioners' meeting on 7 June 2000 as follows:

  1. The Commission's investigation failed to find material evidence that violation of the Fair Trade Law had occurred for the following reasons:
    (1) Pricing in this sector roughly conforms to what economists call the "Web Theory." This product is seasonal with the current price in a given period determined by the number of chicks raised and produced in the previous period. According to a letter received from the Council on Agriculture, prices for white meat chicks between 1997 and 1999 ranged from a high of NT$16.07 in September 1998 and NT$6.60 in June 1997. Price fluctuation was thus approximately 143 percent. Moreover, the average price was less than NT$12 during the 18 months between January 1997 and June 1998. Thus the complainant's claim that the price of white meat chicks had never been lower than NT$12 was inaccurate.
    (2) The Commission investigated members of the Poultry Association including hatchery operators and the operators of poultry farms. Because the interests of these operators conflict, the Poultry Association would have been unlikely to have favored one side or the other. Further, the suspects and victims identified by the complainant stated that the Poultry Association could not have engaged in the acts in question. The Poultry Association also argued that poultry operators' dissatisfaction with chick prices was related to the fragmented nature of Chinese Taipei's [poultry] industry. The Poultry Association also denied having accepted funds for a foundation. In its subsequent investigation, the Commission failed to find evidence that the Poultry Association had collected foundation funds or acted in concert to jack up chick prices.
    (3) During the Commission's investigation, the poultry operators under suspicion denied having engaged in the acts in question and asserted that because competition in the chick market is intense and the operators have conflicting interests, the operators would not have been willing to contribute to a fund that would benefit their competitors. They also stated that pricing of chicks was determined by market supply and demand. Chick prices were high in 1999 because of the affect on the poultry industry of the first phase of the liberalization of chicken imports. This development made incubator operators pessimistic about chicken prices and caused most operators to reduce production. Another contributing factor was the efforts of the Council on Agriculture to discourage farmers from raising livestock [including poultry] which led smaller operators to pull out and caused a shortage of chicks and rising prices. This explanation tallied with the figures for chick production in 1998 and 1999 provided by the Council on Agriculture. It was also consistent with the Council's explanation. Despite multiple investigations, the Commission was unable to obtain material evidence that the Poultry Association had violated the Fair Trade Law.

  2. Also, according to the Animal Husbandry Law and the provisions of other relevant laws and regulations, the production, sale, and pricing of animal husbandry products falls under the jurisdiction of the competent agency for agriculture. Consequently, the Council on Agriculture was invited to join the disposition of this case.

Summarized by Yang Hsiu-yun
Supervised by Lin Yu-ch'ing


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