Jih You Waste Disposal Corp. was alleged to have opportunistically inflated medical waste disposal prices
Case:
Jih You Waste Disposal Corp. was alleged to have opportunistically inflated medical waste disposal prices
Key Words:
contaminated medical waste, monopolistic enterprise, abuse of market position
Reference:
Fair Trade Commission Decision of November 30, 2000 (the 473rd Commissioners' Meeting)
Industry:
Industrial Waste Disposal Industry (8102)
Relevant Law:
Article 10 of the Fair Trade Law
Summary:
1. Information released by the Southern Taiwan Joint Services Center indicated as follows: The Kaohsiung County Joint Medical Waste Disposal System had ceased operating due to its inability to comply with existing regulations in the area. The consequence of the halt in operations is that, in addition to Kaohsiung Chang Gung Memorial Hospital, Jih You Environmental Technology Corp. (hereinafter referred to as "Jih You") is the only domestic company qualified to handle, process and dispose of medical wastes. Kaohsiung Chang Gung Memorial Hospital has refused to assist Kaohsiung City in the handling and disposal of its medical wastes. Jih You has subsequently taken advantage of the opportunity to raise its fees by 300 percent and to demand the signing of a three-year contract for waste disposal services, evoking objections from the Kaohsiung Medical Association. Also, Legislator Hsu Ching-yuan reported to the Cabinet that private medical waste handlers in Taitung County had applied usurious rates for their services, prompting the Legislature to hold public hearings on the issue. The Tainan County Dental Association also issued a report on the problem of soaring medical waste disposal fees. Investigations into the fluctuating fees for medical waste handling and disposal are now underway in Tainan County, Taitung County and Kaohsiung. 2. Companies in Chinese Taipei that currently handle medical waste are Chia Teh Technology Development Corp. ("Chia Teh") and Jih You. Chia Teh also concurrently runs a medical waste collection business. Jih You maintains a cooperative relationship with Cheng Hsin Environmental Engineering Corp. (hereafter referred to as Cheng Hsin), Lang Wei Environmental Engineering Corp. and Chi Tai Environmental Corp. The latter three companies perform medical waste collection tasks for Jih You. Cheng Hsin also handles price quotes, billing and bill collection from medical institutions in Kaohsiung, Tainan County, Taitung County and other southern and central areas on behalf of Jih You. Cheng Hsin then pays Jih You for the costs of final handling and disposal (incineration) of the medical waste. As Jih You has no direct trading relationship with any of these medical institutions, Cheng Hsin should be the party under review in this case. 3. According to Article 13 of the Solid Waste Disposal Law, contaminated medical waste may be disposed in the following ways: 1. Self collection, handling and disposal. 2. Cooperative collection, handling and disposal. 3. Commissioned collection, handling and disposal. 4. Disposal abroad. 5. Other methods subject to the approval of the competent central government authorities. Regulations contained in Article 13, Paragraph 10 state that if a medical institution cannot independently dispose of the medical waste it creates and is unable to contract with an outside organization qualified to handle medical waste collection and disposal, the institution must take appropriate steps to store its medical waste. When necessary, the Department of Health will collect fees to assist medical institutions, either independently or in a supporting role, in making provisions for the proper handling and disposal or temporary storage of the medical waste they create. The Environmental Protection Administration further states: " ... cooperative systems for the collection of medical waste will be set up under the guidance of the Department of Health's "Essential Guidelines for the Promotion of a Medical Waste Disposal System." Also, public and privately run waste disposal enterprises must be operated in accordance with the "Regulations Governing Public and Private Waste Disposal Organizations." With regard to the collection, handling and disposal of contaminated medical waste, there exists no statutory, technological or other barriers that might exclude competitive entry into the market and would make Cheng Hsin a monopolist defined by the Fair Trade Law. 4. With regard to the waste disposal services provided by Cheng Hsin on behalf of the Tainan County Dental Association, the Kaohsiung Medical Association and the Taitung Medical Association, there has been no finding of improper determination or alternation of the fees collected or prices quoted, or abusing market position by the company: (1) A review of the information provided by Cheng Hsin concerning the contracts consummated by the company and its medical institution clients indicates that prior to August 2000, standardized waste disposal contracts signed between the company and medical clinics charged a waste collection fee for 20-liter waste barrels of NT$21,000 annually or NT$2,000 monthly. For 40-liter waste barrels, the charge would be NT$30,000 annually or NT$2,750 monthly fee (a small percentage of contracts indicated a monthly fee of NT$2,650). After August 2000, annual fees for 20-liter waste barrels rose to NT$22,800 and monthly fee to NT$2,100; fees for 40-liter waste barrels remained the same. These figures applied for waste disposal contracts signed by Cheng Hsin with most of the clinics in western Taiwan. Waste disposal contracts signed by Cheng Hsin with hospitals in western Taiwan were based upon the weight of the waste handled, with hospitals paying between NT$40 and NT$65 per kilogram of waste handled. The figures can be verified by checking copies of standardized contracts provided by Cheng Hsin and copies from hospitals with which contracts were signed. (2) The Tainan County Dental Association in 1999 paid an annual fee of NT$13,200, with an average monthly fee of NT$1,100 for waste disposal. That figure compares favorably with disposal fees paid by clinics in the same or nearby areas. In August 2000, Cheng Hsin quoted an annual fee of NT$21,000 for disposal services for the Tainan County Dental Association, a figure consistent with that for disposal of 20-liter waste barrels from clinics during 1999, and lower than the volume-based NT$22,800 annual disposal fees collected from clinics beginning in September 2000. The price eventually agreed upon by both sides, NT$19,000 with an average monthly fee of NT$1,600, still compared favorably with other clinics. In its previous waste disposal contracts the Tainan County Dental Association clearly received a preferential rate so that even after Cheng Hsin's upward rate adjustment in its new contracts in August 2000, waste disposal fees charged the association were still lower than those in contracts signed with clinics for the handling of 20-liter barrels of waste, the smallest unit handled. It is therefore difficult to prove improper price changes by the company. As for the volume of the containers Cheng Hsin used as a benchmark for calculating fees for its clinic clients, the company was required to collect the waste for disposal within seven days, regardless of how much contaminated waste a clinic had produced, which should be treated as a fixed cost. Also, the capacity of the containers and the weight of contaminated medical waste are not necessarily correlative. A container may be filled to capacity but still be very light. Chia Teh and the Taipei Municipal Medical Waste Disposal Cooperative also base their fees upon a specific container volume collected on a monthly basis. Thus Cheng Hsin's collection of fees from its clinic clients based upon container volume and not upon weight is not unreasonable. (3) With Taitung County lying along the east coast of Chinese Taipei and Cheng Hsin located in Tainan County's Jenteh Hsiang, Cheng Hsin's transport costs for servicing the Taitung region are higher than those for the company's western region clients. Also, there are only about 150 clinics in Taitung County, a far lower figure than the more heavily populated western region. With its rugged terrain and occupying a long, narrow region, Taitung does not offer Cheng Hsin's service to the county an economy of scale. Also the total profit on a per diem basis is lower than that for services performed in the western region. Given these factors, it would seem reasonable that Cheng Hsin's fees for collection of contaminated medical waste in Taitung County would be higher than for the same services performed in the western region. In 1998, member clinics of the Taitung County Medical Association paid a monthly fee of NT$1,000 for waste collection services. In the following year, the fee rose to the level of NT$15,600 annually or NT$1,300 per month. This was significantly lower than the standardized contracts signed by Cheng Hsin's clients in western Taiwan. With higher operating costs, no economies of scale and narrower profit margins for medical waste collection services in the Taitung County region, there is really no basis for comparison with prices for those same services in the western region. Returning to the fee collection standard employed by Cheng Hsin for member clinics of the Taitung Medical Association, the company had initially quoted an annual price of NT$37,200 regardless of the containers actually used, which had resulted in an average monthly fee of NT$3,100, the same amount the company charged for collection services in Makung in the Penghu Islands. Following negotiations, the two sides eventually agreed upon an annual price of NT$29,000 regardless of the containers actually used, still lower than the NT$30,000 annual fee for collection of a 40-liter container in the western region. In comparison, Chia Teh, which currently can only serve northern Taiwan, from April through May 2000 offered existing clients a one-time annual fee of NT$24,300 for collection of 20-liter containers and NT$32,400 for collection of 40-liter containers. The promotional fee was part of the company's celebration of the opening of its Miaoli plant. In October 2000 the company announced a new price of NT$29,000 for collection of 20-liter waste barrels, although the NT$32,400 rate remained for 40-liter waste barrels. The new rate applied to both new and existing customers. Comparatively speaking, there is no indication that the price Cheng Hsin quoted to the Taitung County Medical Association was unreasonably inflated. Fees collected by the company in the Taitung County region have actually been consistently lower than those collected from clients in western Taiwan. Given that the company's waste collection overhead is higher in Taitung County than in western Taiwan, it would be difficult to prove that Cheng Hsin's price hike for the Taitung County Medical Association was improper. (4) With regard to the report from the Kaohsiung Medical Association that Jih You raised its fees for waste disposal services several-fold, the rate hike was actually based on a price quote from Cheng Hsin and passed on to the association via Jih You. The quoted price, NT$22,800 annually for disposal of 20-liter waste barrels and NT$30,000 annually for disposal of 40-liter waste barrels is no different from that on new standardized contracts the company began using after August 2000. Cheng Hsin offers three-year contracts at an annual cost of NT$21,600 for 20-liter barrels and NT$30,000 for 40-liter barrels, roughly the same as Cheng Hsin's original standard price. Cheng Hsin also has no actual contractual relationship with the member clinics of the Kaohsiung Medical Association. Comparisons with the NT$800 fee paid by the association's member medical institutions to contract waste disposal through the Kaohsiung Joint Medical Waste Disposal System are irrelevant and it cannot be said the Cheng Hsin unreasonably hiked prices several-fold as had been alleged. (5) The prices for medical waste disposal services quoted to the Tainan Dental Association and the Taitung County Medical Association were far lower than the standard price paid by Cheng Hsin's other clinic clients. The price hike still does not greatly exceed the pricing standards set with Cheng Hsin's other clinic clients. Although the price hike followed the halt in disposal services to the Kaohsiung area by Chia Teh and Wanli Hydraulic Enterprise resulting from either public protests or a shut down by the authorities, it still cannot be treated as a violation of the Fair Trade Law.Appendix: Jih You Environmental Technology Corp.'s Uniform Invoice Number: 89922041 Cheng Hsin Environmental Engineering Corp.'s Uniform Invoice Number: 16010594 Summarized by Chen, Chun Ting; Supervised by Yang, Hsiu Yun