Concerted action to raise the price for cylindered liquefied petroleum gas (LPG) by Kuo T'ai, Ta Chung, and Yung Hsin, three LPG suppliers in the Cheng Gung Chen area of Taitung County, in violation of the Fair Trade Law
Case:
Concerted action to raise the price for cylindered liquefied petroleum gas (LPG) by Kuo T'ai, Ta Chung, and Yung Hsin, three LPG suppliers in the Cheng Gung Chen area of Taitung County, in violation of the Fair Trade Law.
Key Words:
concerted action to raise prices, cylindered LPG, malicious competition
Reference:
Fair Trade Commission Decision of December 21, 2000 (the 476th Commissioners' Meeting); Disposition (89) Kung Chu Tzu No. 225
Industry:
retailing of other fuels (5449)
Relevant Laws:
Article 14 of the Fair Trade Law
Summary:
1. This case originated with citizen's complaints to the Taitung County Government's Consumer Service Center. It was reported that the price of cylindered LPG in Taitung and P'intung cities was NT$400 for a 20-kilogram cylinder. However, the three LPG retailing companies of Kuo T'ai, Ta Chung, and Yung Hsin in the Cheng Kung Chen area of Taitung county had engaged in concert action to set the price for 20-kilogram cylindered LPG at NT$480 in the urban area, and NT$530 in the rural areas outside the town. Meanwhile, information concerning the three companies' acting jointly in February of 2000 to raise the price of cylindered LPG from NT$380 to NT$520 were also provided to the Service Center, which raised the concern for its violation of the Fair Trade Law. 2. After investigation the Fair Trade Commission (FTC) found as follows: Taitung County is a long, narrow area running in the north-south direction, with Cheng Kung Chen situated in an outlying area near the sea. Based on the consideration of the extra costs, time and manpower required for the transportation of cylindered LPG to Cheng Kung Chen, retailers from nearby towns did not serve customers in Cheng Kung. Accordingly, the cylindered LPG retailing market in Cheng Kung formed an independent market, with only the three companies listed above competing in that market. Price competition among the three firms in Chen Kung lasted for quite a long time. To avoid incurring heavy losses and to take advantage of the opportunity that China Petroleum had just raised the price for household LPG, they held meetings at the Fu Pin and Yi Le restaurants in Cheng Kung on February 18 and March 29. Under the pretexts of improving long-term losses, reducing malicious competition, and reflecting reasonable business costs, they agreed to the following scheme: from February 19, the price for urban household LPG would be raised from NT$350 per 20 kilogram cylinder to NT$480; in suburban areas, the price would be raised to NT$530. For business users, it would be raised to NT$450. Moreover, from April 1, the prices of LPG were to be further raised to NT$520 for household users and to NT$480 for business users. The consensus to raise and fix prices revealed that competition in the Cheng Kung area of Tiatung had been restricted. 3. To summarize, the Kuo T'ai, Ta Chung, and Yung Hsin companies in Taitung County's Cheng Kung Chen reached agreements in February and March of 2000 respectively to raise the prices for cylindered LPG and not to compete for customers. Those agreements eliminated price competition among the retailers, and their concerted action on prices for the purpose of gaining illegal profits resulted in substantial restriction of competition in the relevant market. Those actions violated the prohibition of concerted action under Article 14 of the Fair Trade Law. The FTC recognized the fact that these three companies supply commodities by their own labor, are small operators and were first offenders. In order to discourage such practices and to maintain order in the market, the FTC made a disposition pursuant to the forepart of Article 41, ordering that they immediately cease such concerted action. In addition, a fine of NT$100,000 was imposed on each of the three offenders. Appendix: Kuo Tai Natural Gas Company's Uniform Invoice Number: 74904636 Ta Chung Natural Gas Company's Uniform Invoice Number: 78763593 Yung Hsin Natural Gas's Uniform Invoice Number: 93052191 Summarized by Hsiulin Hsieh; Supervised by Tso Tien Liang