A complaint alleging the Taiwan Flour Mills Association instituted a total quantity control and quota system when jointly purchasing and importing wheat for 32 flour producers, by means of coordination and acting in concert, and by calling meetings, which had the effect of restricting competition and violated Article 14 of the Fair Trade Law

Chinese Taipei


Case:

A complaint alleging the Taiwan Flour Mills Association instituted a total quantity control and quota system when jointly purchasing and importing wheat for 32 flour producers, by means of coordination and acting in concert, and by calling meetings, which had the effect of restricting competition and violated Article 14 of the Fair Trade Law.

Key Words:

joint purchasing, restrict competition, flour

Reference:

Fair Trade Commission Decision of May 3, 2000 (the 443rd Commissioners' Meeting); Disposition (89) Kong Ch'u Tzu No. 091

Industry:

Grain Milling Industry (1152)

Relevant Laws:

Articles 14, 16, and 41 of the Fair Trade Law

Summary:

  1. The Taiwan Noodle Producers Association (the "Noodle Association") filed a complaint with the Fair Trade Commission (the "Commission") alleging that flour producers attempted to increase flour price by jointly reducing their wheat purchases.

  2. The Commission undertook a through investigation after receiving the complaint. To obtain the information concerning the production, sales and the current market situation in the flour industry, the Commission not only sent survey of market structure to upstream flour producers and downstream wholesalers and retailers but also requested the Taiwan Flour Mills Association (the "Flour Association") to submit information on its members' production capacities, equipment utilization rates, outputs, sales, raw materials imports, and unit prices for comparison purpose. The Commission also invited more than 10 representatives of flour producers to provide in person their justifications for the alleged misconduct. The followings are the results of the investigation.
    Under the approved joint purchasing policy, the current 32 flour producers in this country appeared to have reoriented the overall industry around the principle of "co-exist and co-prosper." In 1997 and 1998, flour producers attended meetings to apportion their import quantities. In July of 1998, the Flour Association effectively intervened in each member's inventory management by implementing what it called the "Inventory Allocation and Supplementation Table." In October of 1998, a general meeting was called by the Flour Association to discuss the predetermined import quota for 1999.
    According to Article 14 of the Fair Trade Law, no enterprise shall have any concerted action. It is obvious from the results of the investigation that the Flour Association used resolutions to implement a total quantity control and quota system, and had improperly intervened in each member's inventory management, in violation of Article 14 of the Fair Trade Law. The Flour Association was the entity that committed the concerted action. Its subordinate entity, the Allocation Working Group, organized "purchase allocation meetings" in which agreements were reached and then notified to each member for further implementation. Those agreements consisted of purchase quota and predetermined annual import quantities. The Flour Association's institution of a total quantity control and quota system had restricted enterprises' freedom to determine their own purchase quantities. It improperly intervened in each member's inventory management and obstructed fair competition among enterprises. Its objective was to restrict each member's output level and thereby to reorient the overall industry around the principle of "co-exist and co-prosper."

  3. In sum, the aforesaid actions having the effect of restricting competition constituted concerted behavior prohibited under Articles 7 and 14 of the Fair Trade Law. For these reasons and in view of the degree to which the offenses impede the trading order, the period the concerted action had lasted, the Flour Association's market position, and the fact that the Flour Association committed the acts despite knowing they were illegal, the Commission ordered the Flour Association to cease these practices within the specified period, and imposed the Flour Association a fine of NT$20 million pursuant to the forepart of Article 41 of the Fair Trade Law. The Flour Association's actions also exceeded the scope of the decision dated December 31, 1997, ref. (86) Kong Lien Tzu No. 012, in violation of Article 16 of the Fair Trade Law. The Commission therefore rescinds the decision granting the aforementioned approval.


Appendix:
Taiwan Flour Mills Association's Unified Invoice Number: 03783203

Summarized by Hou Wen-hsien
Supervised by Wu Te-sheng


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