Five manufacturers of surgical suture line including Ta Sheng Ltd., Co. bidding for a 1998 National Taiwan University Hospital procurement of surgical suture line raised the bidding prices in concert in violation of Article 14 of the Fair Trade Law
Case:
Five manufacturers of surgical suture line including Ta Sheng Ltd., Co. bidding for a 1998 National Taiwan University Hospital procurement of surgical suture line raised the bidding prices in concert in violation of Article 14 of the Fair Trade Law
Key Words:
surgical suture line, concerted act
Reference:
Fair Trade Commission Decision of January 5, 2000 (the 426th Commissioners' Meeting); Disposition (89) Kung Tzu No. 003
Industry:
Medical Treatment Instruments and Equipment Industry (3330)
Relevant Laws:
Article 14 of the Fair Trade Law
Summary:
1. Background: This case involves the participation of five companies, Surgitech Corporation, Unik Surgical Sutures Mfg. Co., Johnson & Johnson Medical Taiwan, Ta Sheng Ltd., Co., and B. Braun Taiwan Co., Ltd., in the tendering of bids for a contract to purchase 53 surgical suture line items by National Taiwan University Hospital ("NTUH") in July, 1998. The bids were opened on August 13, 1998. The prices quoted in the bids had increased by 130%~391% from the last tendering. The prices and their margin of increase were very near to one another suggesting that a concerted action to raise the prices was involved. 2. In 1995, the number of brands of chemically-synthesized absorbent suture line had risen, price competition had intensified, and NTUH's purchases of surgical suture line had fallen substantially. This fall was particularly noticeable in its purchases of chemically-synthesized surgical suture line. The prices for surgical suture line fell from NT$90-120 per line in 1995 to NT$40-100 in 1997; however, the prices of the participants in this tendering rose substantially to around NT$120 in 1998. As the surgical suture line market is an oligopoly, the transparency of prices in the market is high. If the individual companies wanted to raise the price of surgical suture line sold to NTUH, they would have to do so in concert with all of the companies, or risk being eliminated from the market. Consequently, the respondents must have had a strong motivation to coordinate their efforts in a concerted action to raise the prices. The respondents must have reached an understanding as to their quoted prices, beca use their originally quoted prices had been sent in advance, and therefore did not need to be decided on-site, and the prices had risen at the same time to nearly the same levels under circumstances where they could not possibly know the amounts of the quoted prices. It is evident that the rise in prices was not due to one company raising its prices and the others following suit, but was an informal and binding cooperative action to restrict competition by bringing ideas into conformity. This action is also specifically addressed in the provisions of the Fair Trade Law (FTL) regarding "concerted acts." 3. The respondents claimed that the rise in prices of the bid tendering at issue was due to fluctuations in exchange rates and increases in supplier prices. They also claimed that prices were quoted according to the prices for surgical line in the National Health Insurance Bureau's Table of Compensation for Specialized Sanitation Materials that are based on market prices. However, exchange rate fluctuations at the time were not substantial enough to explain the price rise, and as the structure, costs, and production and sales strategies of each company are different, it is very unlikely that the different companies would increase their prices all at the same time unless there were massive price increases on the market. Also, taking compensation payments of different national health care companies as a baseline, and looking at the quoted prices and price decreases of the different companies, and the state of competition, many doubtful points remain, and the explanations of the different companies do n ot hold water. Also, the table had been cancelled in July 1997, so the listed prices of the National Health Insurance Bureau for special sanitation materials can no longer be trusted as market prices. The respondents' acts of raising prices in conformity had the effect of restricting competition in violation of Article 14 of FTL prohibiting acts of concerted action. Appendix: Surgitech Corporation's Uniform Invoice Number: 86047763 Unik Surgical Sutures Mfg. Co.'s Uniform Invoice Number: 33730204 Johnson & Johnson Medical Taiwan's Uniform Invoice Number: 18838867 Ta Sheng Ltd., Co.'s Uniform Invoice Number: 0438779 B. Braun Taiwan Co., Ltd.'s Uniform Invoice Number: 23525106 Summarized by: Lin Hsiao-hung; Supervised by Li Yen-ting