Ta An Medical Supplies Company violated the Fair Trade Law by improper price gouging, taking advantage of the emergency situation during the domestic outbreak of SARS (Severe Acute Respiratory Syndrome) and the resulting imbalance of supply and demand

Chinese Taipei



Case:

Ta An Medical Supplies Company violated the Fair Trade Law by improper price gouging, taking advantage of the emergency situation during the domestic outbreak of SARS (Severe Acute Respiratory Syndrome) and the resulting imbalance of supply and demand

Key Words:

SARS, temperature sensors, price gouging, ear thermometers

Reference:

Fair Trade Commission Decision of June 12, 2003 (the 605th Commissioners' Meeting); Disposition Kung Ch'u Tzu No. 092098

Industry:

Retail Sale of Drugs, Medical Goods (4651)

Relevant Law:

Article 24 of the Fair Trade Law

Summary:

1. This case originated with a citizen who, on 6 May 2003, purchased a “TN105 infrared temperature sensor” from Ta An Medical Supplies Company (Ta An) for NT$5,500. Believing the company may have been price gouging in response the outbreak of the SARS epidemic, the citizen submitted a complaint to the Fair Trade Commission (FTC) with a purchase receipt attached.

2. In its investigation the FTC found as followings:
(1) Ta An claimed the following: That in May 2003 it had purchased 150 of the aforesaid temperature sensors from its upstream supplier, and as it was selling this item for the first time, inquired of the delivery person about a suggested retail price and was given the figure NT$5,500. Afterwards, it sold two or three of the sensors and customers responded that the price was too high, so it accepted the return of several and provided refunds as well as informing the upstream supplier of the problem. The upstream supplier checked the price and found there had been an error in the original price quotation and refunded the overage, thus lowering the actual cost of the sensors for Ta An. Ta An thereafter continued to sell the entire stock of those items at prices of NT$3,500 and NT$2,500.
(2) As Ta An did not provide any purchase invoices for the temperature sensors, the FTC verified Ta An’s statements with its upstream supplier, and found that Ta An's statements of the matter was credible.

3. Reasons for disposition:
(1) Article 24 of the Fair Trade Law provides that “In addition to what is otherwise provided for in this Law, an enterprise shall not engage in other deceptive or obviously unfair acts that are capable of affecting trading order.” The term “in addition to what is otherwise provided for in this Law” means unfair competitive practices of an enterprise that are not regulated under any other provisions of the Fair Trade Law. Based on this provision, if an enterprise instituted improper price increases during the period of the SARS epidemic for temperature sensors such as forehead or ear thermometers at a time when market demand for those items drastically increased, and if the amount of the increase was marked and in excess of normal profits on such an item, such actions would constitute a violation of Article 24 of the Fair Trade Law.
(2) It was found that Ta An first began to sell the given temperature sensor during the period of the SARS epidemic, and the prices of NT$5,500, NT$3,500 and NT$2,500 it asked were far higher than its own cost for the goods, allowing for profits in excess the norm. This was deemed improper and an obvious use of the imbalance between supply and demand in the market for temperature sensors prevailing under the unusual circumstances of the time. The business failed to carry out its obligation to society by helping to maintain price stability, but instead took advantage of information asymmetry or other factors placing the buyer in a disadvantageous position in order to engage in unfair trading practices. Such practices violate the prohibition under Article 24 of “obviously unfair practices toward trading counterparts.” In consideration of factors such as the motives for its actions, the degree of influence on the market trading order, the expectation of illicit gains, the duration of the period during which violations continued and the violator's attitude after the fact, the FTC ordered Ta An to immediately cease its violations pursuant to the forepart of Article 41 of the Fair Trade Law and imposed an administrative fine of NT$80,000.

Appendix:
Ta An Medical Supplies Company’s Uniform Invoice Number: 77836289

Summarized by Sun, Ya-Chuan; Supervised by Wu, Bi-Ju