The Fair Trade Commission investigated, ex officio, on the case that the Lubricants Division of Chinese Petroleum Corp. and its national association of lubricants distributors coordinated actions to designate a "primary bidder" in tendering bids for the procurement of lubricants by government agencies or state-owned enterprises
Case:
The Fair Trade Commission investigated, ex officio, on the case that the Lubricants Division of Chinese Petroleum Corp. and its national association of lubricants distributors coordinated actions to designate a "primary bidder" in tendering bids for the procurement of lubricants by government agencies or state-owned enterprises
Key Words:
Principles for Handling Tenders for Government Procurement of Lubricants, official memorandum, national association of lubricants distributors
Reference:
Fair Trade Commission Decision of September 6, 2001 (the 513th Commissioners' Meeting); Letter (90) Kung Er Tzu No. 890556-011
Industry:
Oil Refining (2310)
Relevant Law:
Article 19(iv) of the Fair Trade Law
Summary:
1. The Fair Trade Commission (FTC) initiated its own inquiry into this case after a legislator called a 9 November 1999 news conference charging that the Lubricants Division of Chinese Petroleum Corporation (CPC) and the national association of lubricant distributors violated the Fair Trade Law (FTL) in their coordination of participating in public procurement of lubricants by government agencies or state-owned enterprises. Relevant news reports of "bid-rigging" referred to CPC's alleged orchestration, in consultation with its distributors association, of "primary bidders" to respond to an invitations to tender bids for public procurement of lubricants published by the Veterans Affairs Commission's Ret-Ser Engineering Agency and the Taiwan Railway Administration. The "primary bidders" were basically CPC's primary distributors who would be designated according to CPC's "Principles for Handling Tenders for Government Procurement of Lubricants" or the company's "Principles for Handling Tenders for Private Procurement of Lubricants," in possible violation of Article 19(iv) of the FTL. 2. The investigations found that CPC's Lubricants Division formulated the above-mentioned principles for handling tenders for government and private lubricant procurement cases during its 14 May 1997 annual meeting and operations conference. According to these principles, CPC would recommend a distributor as the bidder based upon its own data or upon data filed by distributors. In practice, CPC would designate a distributor as the "guiding bidder" via an official memorandum and request that all other distributors "cooperate" or "consult" with the guiding bidder. In July 1999, the Ret-Ser Engineering Agency's Taipei-Ilan Freeway Construction Department conducted an invitation to tender for procurement of lubricants. CPC's official memorandum designated Chian Wei Corp. as the guiding bidder, and Chian Wei subsequently won the actual bid. CPC's principles for handling government procurement and the official memorandum designating the "guiding bidder" violated Article 19(iv) of the FTL by "causing another enterprise to refrain from competing in price, or to participate in a merger or a concerted action by coercion, inducement with interest, or other improper means." 3. However, the FTC found that prior to the investigation, CPC had ceased contact with the distributors association (the association itself was disbanded in December 1999) and discontinued use of the previously mentioned principles for handling government or private procurements. In addition, considering the intense competition in the lubricants market, although CPC's actions had the effect of limiting competition, CPC distributors were still required to face stiff competition from other brands and thus the impact upon the lubricants market cannot be considered obvious. Paragraph 2 of the FTC's "Guidelines for Reviewing Cases Involving Enterprise's Voluntary Cessation or Correction of Violating Acts" states that "Where an enterprise has voluntarily ceased or corrected the violating act prior to the Commission's investigation on its own initiative or based on a complaint, the Commission may stop the investigation or decide not to make any disposition, unless the violating act seriously affects the trading order or is a concerted action that has been implemented." Thus, the FTC resolved not to make a disposition against CPC. Appendix: Chinese Petroleum Corp.'s Uniform Invoice Number: 03707901 Summarized by Lin, Hsiao-Hung; Supervised by Lin, Gin-Lan