The Hualien County Liquid Fuel Trade Association was complained for alleged violation of the Fair Trade Law by uniformly fixing the unit retail price of natural gas cylinders among Hualien gas vendors
Case:
The Hualien County Liquid Fuel Trade Association was complained for alleged violation of the Fair Trade Law by uniformly fixing the unit retail price of natural gas cylinders among Hualien gas vendors
Key Words:
Trade Association, uniform pricing, cost calculation formula, gas cylinder
Reference:
Fair Trade Commission Decision of July 12, 2001 (the 505th Commissioners' Meeting); Disposition (90) Kung Chu Tzu No. 090
Industry:
Other Service Industry (9421)
Relevant Law:
Article 14 of the Fair Trade Law
Summary:
1. This case originated from complaints by Hualien residents about continually rising gas prices in the Hualien area. Prices for a 20 kg cylinder of gas rose from NT$300 to NT$400 in January 2000, and again to NT$650 in April of the same year. According to local gas vendors, the Hualien County Liquid Fuel Trade Association uniformly raised gas prices in the county. The Fair Trade Commission (FTC) was requested to investigate the matter to protect consumer interests. 2. The investigation found that the market price for canister gas dropped to NT$300 per 20 kilograms at the end of 1999 as a result of new operators and unlicensed operators successively entering the market, sparking price competition. Between January and March 2000, the market prices of gas cylinder in the Hualien County area appeared divergent. When the Chinese Petroleum Corp. (CPC) adjusted liquid gas prices in March 2000, the respondent, the Hualien County Liquid Fuel Trade Association took advantage of the price adjustment initiated by CPC, calling a meeting of all Hualien area gas vendors at the Tung Shuai Hotel that same month. The respondent argued that a price increase was needed to reflect the increased costs and avoid long-term loss. Association Chairman Fan Chen-chun, citing his Tai Ping Gas Co. Ltd.'s cost for raw materials as a benchmark, calculated that a reasonable price for a 20 kg cylinder of gas should be NT$560, while a 16-kg cylinder should cost NT$450. A uniform pricing agreement was reached during the hotel meeting and declared that "beginning 1 April (28 March for certain gas vendors), prices for a 20-kilogram cylinder of household use gas shall be NT$560 and that for a 16-kg cylinder shall be NT$450." The respondent notified all area gas vendors of the above uniform pricing agreement and urged them to comply. Most gas vendors in the Hualien area adjusted prices accordingly after receipt of the notification. The price hike, however, lasted just two months before cylinder of gas prices fell to NT$530 per 20-kilogram cylinder due to competitive pricing among industry operators. In another bid to drive up prices, the respondent used CPC's NT$0.9 per kilogram increase in gas prices on September 20 as a pretext to again notifying gas vendors that the price of cylinder gas should be raised to NT$550 for a 20-kilogram cylinder to reflect rising operating costs. It is clear that the respondent was restricting the competitive mechanism in the Hualien cylinder gas market, affecting the market trading order and infringing upon consumers rights. 3. Based on the findings of the investigation, the FTC ruled that the Hualien County Liquid Fuel Trade Association's actions in calling the March 2000 meeting of Hualien area gas vendors, fixing canister gas prices and concluding an agreement to raise the retail price of cylinder gas, constituted commodity price-fixing through agreements. These actions resulted in substantial restraints on competition in the relevant market. After giving due consideration to relevant factors such as the motives, purposes, the size of the participating enterprises and the operational status, the FTC made a disposition pursuant to the forepart of Article 41, ordering that each enterprise involved immediately cease their concerted action and pay fines of NT$600,000 each. Summarized by Hsieh, Hsiu-Lin; Supervised by Tso, Tien-Liang