Bottled gas distributors in Taitung County allegedly engaged in concerted action to raise prices in violation of the Fair Trade Law
Case:
Bottled gas distributors in Taitung County allegedly engaged in concerted action to raise prices in violation of the Fair Trade Law
Key Words:
bottled gas, gas vendors, price cutting
Reference:
Fair Trade Commission Decision of April 11, 2002 (the 544th Commissioners' Meeting); Disposition (91) Kung Ch'u Tzu No. 091072
Industry:
Wholesale of Petroleum Fuel Products (4531)
Relevant Law:
Article 14 of the Fair Trade Law
Summary:
1. The Taitung County Government (the complainant) reported in a letter to the Fair Trade Commission (FTC) that the price of bottled gas in the county had risen sharply from between NT$350 and NT$380 for a 20-kilogram canister in early July 2000 to NT$560 on 27 July 2000. Following complaints from local associations representing restaurateurs and chefs as well as repeated written complaints from members of the general public, the complainant, suspecting that local vendors of bottled liquefied petroleum gas (LPG) engaged in concerted action to raise gas prices, requested that the FTC investigate. Further, residents of the Taitung County township of Chihshang in December of the same year filed a complaint with the Taitung County Government alleging that the three local vendors of bottled gas engaged in concerted action to monopolize the local market, driving the price for a 20-kilogram canister of gas up NT$170 to NT$570. Consequently, the complainant filed a second request with the FTC to investigate. 2. Taitung County gas businesses have, due to the long and narrow north-south geographic orientation of the county, divided up the local market into three main regions based upon topography and location: Taitung city, the coastal region (including Changpin, Chengkung and Tungho) and the mountain region (Kuanshan, Chihshang, Luyeh). In addition, as about half the population of the county is concentrated in Taitung city, the majority of the county's gas businesses are also located there. In 1999, the Kuo Tai Gas Company (Kuo Tai) of Tawu village in coastal Taitung County crossed over into the Taitung city and mountain region markets from its home coastal region, touching off a price war. In the first half of 1999, Kuo Tai began cutting its bottled gas prices in the mountain region. Due to the relatively few bottled gas vendors in the mountain region, however, competition remained relatively weak and few competitors followed suit. Consequently, in July 1999 vendors in the mountain region did not hesitate to raise bottled gas prices to reflect increased costs following a decision by the Chinese Petroleum Corp. (CPC) to raise its wholesale LPG prices. And on 28 March 2000 following a substantial price increase by CPC, vendors in the region reflected their increased costs by again raising prices to NT$550 per 20-kilogram canister for household use and NT$500 per canister for businesses. In the Taitung city bottled gas market, with the entry into the market of Kuo Tai and a proliferation of unlicensed competitors, the price in 1999 for a 20-kilogram canister hovered between NT$300 and NT$380 for businesses and about NT$400 to NT$500 for household use. Gas prices in the city continued to fall to just over NT$300 per canister following another round of price cutting as Taitung city gas vendors, faced with the loss of customers, were forced to follow suit and cut prices, leaving them operating at a loss. Between May and June 2000, when CPC hiked gas prices several times, Taitung city gas vendors, due to the excessive competition in the city's market, were unable to follow suit further to reflect their increased costs. With the long-term price war in Taitung County's LPG market preventing vendors from adjusting prices to accurately reflect costs and the continued failure of the Taitung County Liquefied Gas Combustible Fuels Association to provide genuine leadership -- the term of office for the association chairmanship had long since expired but new elections had yet to be called -- seven local gas vendors, Yen Ti-lin of Jui Feng Gas Company, Lee Chien-te of Chuan Tai Gas Company, Sun Kuang-ming of Hui Kuang Gas Company, Lan Yi-wen of Li Kuo Gas Company, Tsai Lien-shou of Chih Shang Gas Company, Chien Wei-kuo of Jui Kuang Gas Company and Chung Te-hsiung of Chi Ho Gas Company, sought to alleviate their situation by gaining seats on the association's boards of directors and supervisors. The above seven subsequently called meetings with all Taitung city and county gas vendors held at the Taitung city Workers Recreation Center on 7 July, 13 July, and 20 July. Chuan Tai's Lee Chien-te, purportedly seeking to reasonably reflect costs and citing his own company as an example and in accordance with the cost calculation formula used by the Gas Supply Department of the Executive Yuan Veterans' Affairs Commission, submitted a provisional table of operating costs for each 20-kilogram canister of LPG. Based upon this, Lee, Jui Feng's Yen Ti-lin and Chih Shang's Tsai Lien-shou subsequently proposed fixing a price of NT$560 per 20-kilogram canister (NT$420 for a 15-kilogram canister) as a price that reasonably reflected costs. Further, during the meeting, an agreement was passed stating: "Beginning 15 July 2000, the price for a 200-kilogram canister of LPG for household or business use shall be NT$560 and NT$420 for a 15-kilogram canister." In addition, to prevent Kuo Tai from disrupting the implementation of the agreement, a second resolution was passed during the meeting designating the seven vendors named above to coordinate with Kuo Tai to compel that company to halt sales of low cost bottled gas in the Taitung city market and persuade the company to comply with the adjusted price cited in the above-mentioned resolution. These acts violated the provisions of the forepart of Article 14 of the Fair Trade Law. 3. The seven Taitung County gas vendors named above did on 7 July, 13 July and 20 July 2000 convene a meeting of county gas vendors at the Taitung city Workers Recreation Center, during which an agreement was reached on an adjusted retail market price for bottled gas based upon the cost calculation formula used by the Gas Supply Department of the Executive Yuan Veterans' Affairs Commission. These acts constituted the use of an agreement to mutually restrain the effect of market forces on the price of goods, a violation of the provisions of Article 14 of the Fair Trade Law prohibiting concerted action. Consequently, in accordance with the provisions of the forepart of Article 41 of the Fair Trade Law, the seven were ordered to cease the offending practice effective from the day next following receipt of the FTC's disposition letter and, following consideration of the offenders' motivations, the degree of damage their actions caused to the trading order on the market and the duration of the offense, they were fined NT$100,000.Appendix: Jui Kuang Gas Company's Uniform Invoice Number: 93340601 Chuan Tai Gas Company's Uniform Invoice Number: 74912761 Hui Kuang Gas Company's Uniform Invoice Number: 93291355 Chih Shang Gas Company's Uniform Invoice Number: 93686293 Jui Kuang Gas Company's Uniform Invoice Number: 93340601 Chi Ho Gas Company's Uniform Invoice Number: 00266401 Summarized by Hsieh, Hsiu-Lin; Supervised by Tso, Tien-Liang