The Fair Trade Commission initiated in investigation into whether makers of face masks took advantage of the emergency situation during the domestic outbreak of SARS (Severe Acute Respiratory Syndrome) and the resulting imbalance of supply and demand to raise prices inappropriately in violation of the Fair Trade Law
Chinese Taipei
The Fair Trade Commission initiated in investigation into whether makers of face masks took advantage of the emergency situation during the domestic outbreak of SARS (Severe Acute Respiratory Syndrome) and the resulting imbalance of supply and demand to raise prices inappropriately in violation of the Fair Trade Law
Key Words:
SARS, face masks, supply-demand imbalance
Reference:
Fair Trade Commission Decision of May 8, 2003 (the 600th Commissioners' Meeting); Disposition (92) Kung Ch'u Tzu No. 092058
Industry:
Retail Sale of Drugs, Medical Goods (4651)
Relevant Law:
Article 24 of the Fair Trade Law
Summary:
1. This case originated with public concern in the face of the domestic SARS epidemic, causing a drastic increase in demand for face masks and related medical goods. The Fair Trade Commission (FTC) thus initiated in investigation on 29 March 2003 into whether there had been price gouging, concerted action to raise prices, or improper hoarding of stock in the face mask market. Besides investigating individual complaints, the FTC also used its ex-officio powers to investigate pharmacies and various medical equipment suppliers in order to understand the status of supply and demand on the market and prices at various distribution outlets, with the intent to impose severe sanction under the law for concrete evidence showing any enterprise taking advantage of the situation in a way that would influence the trading order in the markets in question.
2. After collecting basic information on the supply of goods and prices after 29 March 2003, the FTC discovered that initially there were no obvious fluctuations in the volume of supply or in price, though marked increases in demand for face masks and other medical supplies did occur after quarantine was ordered at Ho Ping Hospital on 24 April and the successive quarantines that followed at the Jen Chi and Chung Hsing Hospitals. On 5 May, the FTC dispatched personnel to Chen Kou Co., Ltd. on TungHua Street as part of its investigation into face mask prices and supply and demand conditions, who first purchased one 3M No. N95 face mask, model no. 9211, at the very high unit price of NT$700 and obtained as evidence a receipt with the uniform invoice stamp of the company in question. The FTC’s investigators found that the company neither clearly revealed the source of those goods or the costs involved, nor provided any evidence of the basis on which the price of the goods was set. By setting the price of a single 3M N95 face mask at NT$700, the company instituted a huge price rise reaching as high as nine times the typical market price, a rise of a “clear and obvious degree.” The company had obviously used the SARS epidemic and the supply-demand imbalance as well as information asymmetry or other factors placing the buyer in a disadvantageous position in order to engage in unfair trading practices. These practices were determined by the FTC to be in violation of Article 24 of the Fair Trade Law. In consideration of the seriousness of the violation, the setting of a bad example for society and the damage to the public interest, the FTC reached a resolution in its 600th meeting on 8 May to impose an administrative fine of NT$150,000 on the company pursuant to the forepart of Article 41 of the Fair Trade Law.
3. Based on the results of investigations, the FTC continued with resolutions at successive meetings convened on May 14, 15, 22 and 29 and June 5, 12, 19, and 26, issuing dispositions against importers or retailers such as the above Chen Kou Co., Ltd. for their unfair trading practices that were deemed sufficient to disrupt the trading order by instituting improper price rises in the wake of the emergency situation and the supply-demand imbalance brought about by the outbreak of the SARS epidemic. During the period from 8 May to 26 June, dispositions were issued against 60 enterprises dealing in face masks, with the most serious involving an administrative fine of NT$2 million, for administrative fines totaling NT$6.34 million.
Appendix:
Chen Kou Co., Ltd.’s Uniform Invoice Number: 86152271
Summarized by Lin, Chia-Ti; Supervised by Lin, Gin-Lan