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:
- 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.
- 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."
- 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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