Ex-officio investigation to determine whether Mr. Ou-Yang Ling-tu (operating under the Chi Feng Trading Company) violated the Free Trade Law by hoarding rice wine

Chinese Taipei


Case:

Ex-officio investigation to determine whether Mr. Ou-Yang Ling-tu (operating under the Chi Feng Trading Company) violated the Free Trade Law by hoarding rice wine

Key Words:

rice wine, trading order, hoarding

Reference:

Fair Trade Commission Decision of November 29, 2001 (the 525th Commissioners' Meeting); Disposition (90) Kung Ch'u Tzu No. 193

Industry:

Retail Sale of Food Products and Groceries (4620)

Relevant Law:

Article 24 of the Fair Trade Law

Summary:

1. News reports indicated that prosecutors and police in Tainan on 23 November 2001 discovered that the business operator named above had hoarded tens of thousands of cases of rice wine. The Fair Trade Commission (FTC) decided to launch an ex-officio investigation, and on 26 November 2001 dispatched investigators to the Tainan area. These investigators found that prosecutors and police on the afternoon of November 23 had discovered a large store of rice wine in warehouses located at No. 3432 (lot number), Tungshih Chai, 6 Fen Li, Shanhua Chen (Township), Tainan County. They were still counting the inventory when FTC personnel arrived on November 26. Prosecutors and police also discovered, on the morning of November 26, more than 1,000 additional cases of rice wine in a warehouse at No. 33-1, Lane 245, Chienyeh Road, Kuangwen Li, Shanhua Chen (Township), Tainan County. They were still taking inventory of these items when FTC personnel arrived on November 26.

2. The FTC's investigation revealed that the rice wine discovered by the Tainan prosecutors and investigators belonged to Mr. Ou-Yang Ling-tu (operating under the Chi Feng Trading Company). The warehouse on Chienyeh Road contained 37,580 glass bottles of rice wine. There were two warehouses in 6 Fen Li, each with glass bottles of rice wine stacked to about the height of a person. The great majority of the bottles were not in cases, but were laid on their side in the most space-conserving manner possible. Since the large number of bottles could not be counted within a short period of time, prosecutors, police, and investigators (acting with the consent of Mr. Ou-Yang Ling-tu), took a sampling of the bottles and stacked them in a pile measuring 1.6 cubic meters in volume. Based on the number of bottles in the stack (58) and the dimensions of the total store in the two warehouses, and after Mr. Ou-Yang Ling-tu himself measured the volume of his inventory several times, the parties involved estimated that there were 116,940 glass bottles and 432 plastic bottles of rice wine in the 6 Fen Li warehouses, for a total of 117,372 bottles.

3. Chi Feng Trading Company is a sole proprietorship operated by Ou-Yang Ling-tu. As it conforms to the type of enterprise defined in Article 2(1)(ii) of the Fair Trade Law, it is subject to the provisions of the Fair Trade Law. Moreover, as the company's application for a liquor retailer's permit was approved by the Taiwan Tobacco and Wine Monopoly Bureau on 18 April 2000, it also qualifies as a retailer of tobacco and wine, and as such is obliged to provide customers with rice wine. But the company illegally evaded its responsibilities as a tobacco and wine retailer, and instead hoarded 154,952 bottles of rice wine in its warehouses. The amount of inventory on hand far exceeded the quantity of rice wine distributed by the company over the previous two years (9,516 bottles), and also far exceeded what could be considered a reasonable level of inventory (1,948 bottles, calculated on the basis of average monthly purchases for the same quarter of the year-ago period). Even after accounting for the fact that rice wine sales from January to October in Chinese Taipei increased by roughly 9% over the same period in the previous year, the company's reasonable inventory would still rise to only 2,123 bottles at the most. Almost all of the rice wine was in glass bottles, but the Taiwan Tobacco and Wine Monopoly Bureau stopped using glass bottles for rice wine on 1 July 2001, so it is clear that the company has hoarded the rice wine for a very long time.

During the course of the FTC's investigation, Mr. Ou-Yang Ling-tu could not explain why he had hoarded the rice wine for so long and in a quantity far exceeding its overall sales, nor could he provide any proof to support that his conduct was proper. Further investigation revealed that FTC personnel had already visited Mr. Ou-Yang Ling-tu twice in 1999 on suspicion of hoarding, and urged him during interviews at that time to observe the provisions of the Fair Trade Law. Upon reviewing a photocopy of a judgment rendered by the Tainan District Court, FTC investigators learned that law enforcement authorities had found Mr. Ou-Yang Ling-tu hoarding large quantities of rice wine in three consecutive years (1999, 2000, 2001). The quantity in 2001 was by far the largest of the three years. In view of all the above facts, the FTC concluded that Mr. Ou-Yang Ling-tu's behavior seriously interfered with market mechanisms and harmed the interests of consumers. As such, his actions clearly constituted unfair trade, and were ethically reprehensible and harmful to the public interest. Accordingly, the FTC found the company in violation of Article 24 of the Fair Trade Law. In light of a number of factors (e.g. motive; the amount of the improper windfall that would have been gained; the severity of the damage to the trading order; how long the improper behavior continued; remorse shown; social and economic impact; amount of rice wine hoarded; cooperativeness on the part of the offender after discovery of the violation; etc.), the FTC, in accordance with the forepart of Article 41, ordered the offender to immediately cease, from the day following the date of service of the disposition, the deceptive and unfair behavior which had affected trading order, and further imposed a fine of NT$8 million.

Appendix:

Chi Feng Trading Company's Uniform Invoice Number: 78473588

Summarized by Wu, Pi-Ju;

Supervised by Wu, Te-Sheng


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