Concerted acts by 26 premixed concrete suppliers in Taoyuan area violated the Fair Trade Law
Case:
Concerted acts by 26 premixed concrete suppliers in Taoyuan area violated the Fair Trade Law
Key Words:
concerted acts, premixed concrete, guarantee money, cubic meters, rotating on-site inspection
Reference:
Fair Trade Commission Decision of February 29, 2000 (434th Commissioners' Meeting); Disposition (89) Kung Ch'u Tzu No. 035
Industry:
Premixed Concrete (3050)
Relevant Laws:
Article 14 of the Fair Trade Law
Summary:
1. An anonymous complaint letter forwarded to the Fair Trade Commission (the Commission) by the Taoyuan County Government asserted, in brief, as follows: Twenty-six licensed premixed concrete businesses in the Taoyuan area, concerned about the prevalence of unlicensed competitors who were cutting into their business and threatening their survival, had banded together and set up an office on the seventh floor of the Jih He International Building on Chungcheng Road in Nank'an. Through the office they engaged in concerted acts such as restricting supply, inflating sales prices, and shortening supply times so as to cause their unlicensed competitors to fall seriously behind in their work schedules or to be unable to cover their costs. Documents including the "General Organizational Rules of the Cooperative," "Table of Delivery Volume Ratios," and "Table of Daily and Cumulative Delivery Volumes" were enclosed with the complaint letter for investigation by the Commission. 2. Total monthly demand in the Taoyuan area premixed concrete market does not exceed 600,000 cubic meters of product, so the average monthly sales volume of the 37 premixing facilities of the 26 licensed competitors is only approximately 15,000 cubic meters, much lower than the 20,000 cubic meter output per facility required for an economy of scale. The competition between the competitors is fairly intense. Also, since premixed concrete companies are important trading counterparts of cement businesses, some cement businesses in Chinese Taipei also operate premixed concrete businesses. Four of the business in the current case are actually cement businesses that operate premixed concrete businesses on the side: Taiwan Cement, Hsing Fu, Chia Hsin, and Hsin I. Goldsun Development and the remaining 21 companies engage exclusively in the premixed concrete business. 3. In late 1997 and early 1998, the premixed concrete business was hit island-wide by increased costs due to gravel shortages and rising gravel prices and by plans to bring the premixed concrete industry under the strictures of the Labor Standards Law. The 26 abovementioned Taoyuan area companies took turns arranging dinners and meetings for their fellow competitors to discuss issues such as refraining from supplying on holidays and Sundays, and set up a permanent organization and office to handle related matters. None of the companies that hosted or attended the meetings raised any objections to any of the motions raised at them. The office began operation in March 1998 in a space rented by Huang Hsing Cement, and Wei Huan-jung of Cheng Jung Cement's served as chairman. Managers' meetings and supervisors' roundtable discussions were held weekly, and attended by the managers and supervisors of the various companies. Discussion at the managers' meetings focused on raising or maintaining concrete pric es, restricting delivery volumes, preventing other suppliers from moving in to fill orders for downstream businesses that had already bounced a check to one supplier, and generally avoiding competition that would involve price-cutting or supplying lower quality goods to the market. The investigation found that during the period in which the office operated, from 1 March 1998 until late September 1998, the following measures were implemented by successive resolutions of the 26 companies: (1) Each company reported its average monthly sales volumes for 1997 to serve as a base line for regulating the delivery volume ratios among the various competitors: Each competitor was assigned a number according to the number of facilities it operated, and was listed in an overall table of delivery volume ratios. During the period the concerted act occurred, each competitor reported its actual daily delivery volume to the office, and the office compiled a "Table of Daily and Cumulative Delivery Volumes." In cases of discrepancy between this table and the abovementioned "Table of Delivery Volume Ratios," a competitor was paid (in case of shortfall) or required to pay (in case of excess) an "operational subsidy fee" of NT$150 or NT$200 per cubic meter of shortfall or excess, respectively. (2) To prevent competitors from falsely declaring their delivery volumes, a rotating on-site inspection system was implemented, whereby each competitor dispatched one or more personnel (according to the number of its own facilities) to competitor facilities to carry out on-site inspection of delivery volume, prices, and trading counterparts. (3) The "operational subsidies" began being assessed/distributed by the office on 1 April, and the competitors were required to pay an NT$500,000 deposit to guarantee they abided by the rules. Violators were subject to a penalty to be deducted from the guarantee deposit. The majority of the specialized premixed concrete companies paid the deposit. A small number of the companies, however, declined to pay on the grounds that they were listed companies whose credit should not be called into question. (4) The competitors agreed to raise their prices on new and old contracts. 4. The elements of concerted act under Article 7 of the Fair Trade Law are simply mutual consent, i.e., the participating enterprises need not have actually implemented restraints on business activities to have engaged in concerted act. Goldsun Development and the other 25 companies in this case discussed, negotiated, and reached a consensus on matters including restraints on volume and price in the course of setting up the joint office in March 1998 and during the period of its operation from March through September 1998. The companies varied in their actual degree of cooperation and implementation of the agreement. Some, for instance, did not pay the NT$500,000 deposit; or participated only passively by allowing inspection of their facilities; or only perfunctorily by sending Thai workers to go through the motions of inspection; or refused to pay the "subsidy" when their actual delivery volume was found to exceed the stipulated ratio; or refused to provide their contracts for inspection. Neverthel ess, their acts still constituted concerted act irrespective of the degree of their actual participation. Appendix: Goldsun Development & Construction Co., Ltd.'s Uniform Invoice Number: 24060203 Chia Hsin Ready-Mixed Concrete Corporation's Uniform Invoice Number: 12198203 Hsin I Ready Mixed Concrete Co., Ltd.'s Uniform Invoice Number: 23636102 Kuo P'u Concrete Industrial Co., Ltd.'s Uniform Invoice Number: 22487913 Huang Hsing Cement Industrial Co., Ltd.'s Uniform Invoice Number: 22985720 Concrete Enterprise Co., Ltd.'s Uniform Invoice Number: 09435596 Chung Ni Cement Products Co., Ltd.'s Uniform Invoice Number: 97422961 Liang T'ai Building Materials Industrial Co., Ltd.'s Uniform Invoice Number: 22715992 Cheng Jung Engineering Co., Ltd.'s Uniform Invoice Number: 23211870 Wan Hsin Cement Products Limited 's Uniform Invoice Number: 89843790 Hsing Fu Premixed Concrete Co., Ltd.'s Uniform Invoice Number: 84255792 Cheng You Enterprises Limited's Uniform Invoice Number: 16183960 Wu Hsiung Enterprise Co., Ltd.'s Uniform Invoice Number: 22684463 Hsieh Wang Construction Co., Ltd.'s Uniform Invoice Number: 86653726 Ch'ing Huang Construction Co., Ltd.'s Uniform Invoice Number: 16649691 T'ung Hui Cement Products Co., Ltd.'s Uniform Invoice Number: 86641454 Yung Chu Enterprise Co., Ltd.'s Uniform Invoice Number: 47251457 Ta Yuan Cement Products Limited's Uniform Invoice Number: 23805325 Chun Ch'eng Building Materials Co., Ltd.'s Uniform Invoice Number: 16497913 Chun Ch'ang Enterprise Co., Ltd.'s Uniform Invoice Number: 86675051 Hsin Ming Cement Products Co., Ltd.'s Uniform Invoice Number: 44807101 Ch'ung Lung Premixed Concrete Co., Ltd.'s Uniform Invoice Number: 84583850 Hsiang Hsin Enterprise Co., Ltd.'s Uniform Invoice Number: 86972334 San Ya Building Materials Co., Ltd.'s Uniform Invoice Number: 86839168 Hsing Sheng Building Materials Co., Ltd.'s Uniform Invoice Number: 84661433 Taiwan Cement Corporation's Uniform Invoice Number: 11913502 Summarized by Liu Chin-chih; Supervised by Tsuo T'ien-liang