Investigation on the market conditions and the possibility of price manipulation in connection with the recent price increase in the glutinous rice market
Case:
Investigation on the market conditions and the possibility of price manipulation in connection with the recent price increase in the glutinous rice market
Key Words:
monopoly; glutinous rice
Reference:
Fair Trade Commission Decision of June 29, 2000 (the 451st Commissioners' Meeting)
Industry:
Cultivation of staple grains (0112)
Relevant Laws:
Article 14 of the Fair Trade Law
Summary:
1. In April, the Fair Trade Commission (the Commission) received a copy of a letter to the Council of Agriculture (COA) from the Consumer Protection Association concerning the recent price increases in the glutinous rice market. On 17 April, the Commission sent a letter requesting the competent agricultural authorities to exercise their power under the "Agricultural Commodities Market Trading Law" to make preparation beforehand for this matter, and to keep close contact with the Commission while continuing to monitor the market. In case concrete evidence was found of monopolistic practices, they were further requested to forward such evidence to the Commission for its own reference and disposition. 2. To further understand the market conditions of glutinous rice, personnel from the Commission were dispatched to visit Taiwan Rice Industry Association on 27 April and the Yuan Hung grain mills on 29 May. (1) Secretary-general Li Mei of the Taiwan Rice Industry Association responded: Currently, the number of grain merchants was large enough to make concerted action to manipulate prices in this market unlikely. The alleged price increase was due to the fact that prices for glutinous rice had been maintaining at low levels for quite a long time, and the total acreage devoted to glutinous rice cultivation had been decreasing steadily as well. The price increase was a response to the shortage of supply. However, prices have been falling since COA began to allow rice imports into the market. . (2) Liang Ming-sung, responsible person of Yuan Hung responded: There wasn't a great deal of cooperation among our domestic grain merchants, so they would not have collaborated on the pricing of glutinous rice or withheld product from the market. The price rise was mainly due to the fact that for the last two years, prices for glutinous rice have been lower than the penglai variety [a variety of Japonica rice grown in Chinese Taipei] and long-grained rice. As a result, less acreage was devoted to the cultivation of glutinous rice in 1999, and thereby caused a reduction in the overall yield. On top of that, during the earthquake last year, rice granaries burst and glutinous rice got mixed together with the long-grain and penglai varieties, so that supply was decreased for the first half of this year and prices went up. But with the harvest of the new crop and imports of glutinous rice coming into the market, the shortages should be relieved, and the price for round-grained glutinous rice should gradually dropped; the price should fall somewhat before the Drag on Boat Festival and then fall further afterwards. Long-grained glutinous rice was more widely used, so the extent of price decrease would be less obvious before the festival until after the new crop comes in. 3. In order to prevent either seasonal or structural supply-demand imbalances in the supply of glutinous rice, the Commission has kept in close contact with the Second Division (Special Crops Production Division) of the COA since April, and has obtained the following information: (1) From April until the present, the Commission has received no information from the COA relating to collusion among grain merchants to monopolize the market in violation of the Fair Trade Law. (2) In order to constrain further price increases for glutinous rice, the COA planned to open tenders for imports of 1,500 metric tons of glutinous rice. On April 28, it requested the Central Trust of China (CTC) to open public tenders for import rights for 409 metric tons, and the CTC thereafter also sold import rights for 353 metric tons under further individual applications, for a total of 762 metric tons. This new supply was introduced to the market beginning in mid-May, but still fell short of the originally planned amount by 738 metric tons. To prevent suppliers from taking advantage of the situation to hike prices, the COA continued to accept applications for imports in amounts of about 60 metric tons, and asked the Taipei County Farmers Association to make a special import of 180 metric tons. These imports began coming in during late May and early June, supplying a total of about 1,002 extra metric tons, which were sold to individual grain merchants and retail markets. The latest harvest of domestic glutinous rice, according to COA estimates, had yielded over 800 metric tons at the end of May, and about 4,000 tons of white glutinous rice. (3) According to the COA, the harvest season for domestic rice has arrived, imported rice is reaching the markets, and domestic supply and demand are reaching a balance. Therefore, the shortages of glutinous rice are being relieved and its prices gradually dropping down. Its supply should be adequate prior to the Dragon Boat Festival. 4. The price increase for glutinous rice in this case was due largely to an imbalance between supply and demand. The Commission obtained no substantial evidence worthy of investigation that would support the finding of concerted action of monopolization of the market, but it nevertheless did take action to further its understanding of the situation. The Commission holds that in accordance with "Operating Procedures for Handling Cases Involving Unusual Price Rises for Essential Commodities" there is no need for it to enter into an investigation, but it will continue to supervise the development of the conditions in the glutinous rice market and keep in close touch with the competent agricultural authorities. The Commission will investigate and handle any case where evidence arises to support the finding that industry members are colluding to monopolize the market. Summarized by Tseng Chiu-Chen; Supervised by Lin Yow-Ching