Alleged manipulation and monopolization of the corn market in violation of the Fair Trade Law regarding a marked rise in corn prices prior to the Lunar New Year
Case:
Alleged manipulation and monopolization of the corn market in violation of the Fair Trade Law regarding a marked rise in corn prices prior to the Lunar New Year
Key Words:
rise in corn prices, concerted monopolization, artificial manipulation
Reference:
Fair Trade Commission Decision of March 15, 2001 (the 488th Commissioners' Meeting); Letters (90) Kung Yi Tzu No. 8916260-005, 8916260-006
Industry:
Grain Wholesaling Industry (5121)
Relevant Law:
Article 14 of the Fair Trade Law
Summary:
1. Beginning in December 2000, the Fair Trade Commission (the Commission) received a number of telephone calls from citizens and swine farms stating that corn prices had risen markedly. The Commission also received a telephone call from Legislator Su Huan-chih stating the same. On 20 December 2000, the Commission received a letter from the Republic of China Swine Farming Association and the Pingtung County Friendship Association of the Republic of China Swine Farming Association stating that daily corn prices in three cities had risen from NT$4 to NT$7.2 in a two week period. The letter raised the question of monopolization and asked the Commission to investigate. 2. After its investigation, the Commission found as follows: (1) Corn is a freely imported commodity and the government does not set any qualification for its importers. Businesses can purchase corn in three ways: import on their own, import through an import group to which they belong, or purchase locally through a supplier. Corn importers in Chinese Taipei consist of Pu Feng and Fu Mao (large import groups), Taiwan Sugar Corporation (a direct importer), and T'ai Shen, Chia Ku, Chung Kuo Chen Yeh, Ch'i He, K'ang Na Ke (grain supply agents). Hence, the import channels for corn are not concentrated in Chinese Taipei. (2) There was nothing amiss about the quantities and time of the corn shipments purchased by the Pu Feng and Fu Mao groups delivered during the Lunar New Year. In addition, the member companies had agreed upon the quantities and time of those corn shipments. The Feedstuff Friendship Association was composed of 35 companies including the Fu Mao group. The Pu Feng group was composed of 53 companies including Pu Feng itself. Taking into consideration the large number of companies involved, it would be difficult for them to have intentionally and concertedly delayed loading time; neither was there concrete evidence to show that the two groups did so. (3) Of the five grain supply agents, the monthly quantities and shipping time of the corn imported by Chia Ku and Ch'i He were normal. Although the corn shipments imported by Chung Kuo Chen Yeh via the ship BUNGA SAGA SATU and by T'ai Shen via the ship MIYAMA were delayed, the two companies had submitted wire telegrams sent by the captains of the ships explaining that the delays were due to unavoidable mechanical problems, and no other evidence tending to show that the delays were due to concerted manipulation. (4) As to the part of the complaints alleging that Ta Ch'eng hoarded corn and that such conduct had contributed to the rise in corn prices, after reviewing its monthly stocks, purchases, and consumption of corn between January of 2000 and 2001, the Commission failed to find the commitment of the acts by Ta Ch'eng alleged by the swine farming companies. (5) Operations at the wharfs and granaries of Kaohsiung and Taichung ports were normal, and there were no instances in which the late pick up of shipments impacted the offloading of imported grain shipments. (6) The following is an analysis of the causes behind the rise in corn prices prior to the Lunar New Year. (i) The demand for corn from domestic livestock farming sector relies almost exclusively upon US imports (for example, in 1999, Chinese Taipei imported 4,820,000 tons of corn but it produced only 89,000 tons). Purchasing quantities and shipping time are arranged according to the needs of each purchasing organization (the loading times for each ship are between 15 to 20 days). Loading and shipping time of grain shipments are frequently affected by the weather during the winter season when shipments from the US coasts to Chinese Taipei take 40 days or more. The shipping time for grain shipments are difficult to measure with precision. For a period of more than ten days between December 14 and December 27, no grain shipments arrived in Chinese Taipei. (ii) Between May and October of 2000, corn prices were lower than their import costs, corn imports lost money, and many importers exited the market. When corn prices were low and supplies abundant, corn purchasers began importing directly instead of purchasing locally, and importers kept corn stocks low. Although the importers still in the market increased their purchases of corn shipments arriving in Chinese Taipei between December 2000 and January 2001, the delayed arrival of the two aforesaid shipments until after the Lunar New Year caused the monthly quantities of corn arriving in Chinese Taipei between December 2000 and January 2001 to exceed the monthly quantities of corn arriving between September and November 2000 by only two to four tons. Hence the arriving shipments were insufficient. (iii) Grain is usually in high demand during the Lunar New Year when markets are closed, workers are on holiday, and hence transportation and delivery of corn is impacted. During this particular Lunar New Year, which lasted for eight days, livestock farmers purchased more corn, and both livestock farmers and feedstuff companies stored more corn. Prior to October 2000, when corn prices in Chinese Taipei were low, corn stocks for livestock farmers and feedstuff companies were low. To avoid cutoffs in the supply of corn for use by livestock and in processing, these companies tried to make up for the shortage. But insufficient and sporadic shipments stretched the limits of corn stocks prior to the Lunar New Year causing a marked rise in corn prices. (7) In sum, corn is a freely imported commodity, there are many importers in the market, there was no concrete evidence to prove that the alleged concerted manipulation of corn importation and prices had occurred. The complainants had failed to provide names and evidence of the suppliers alleged to have engaged in the concerted manipulation either. The rise in corn prices prior to the Lunar New Year was in fact caused by the imbalance between market supply and demand. Summarized by Mai, Huei Li; Supervised by Yang, Hsiu Yun