Complaint against operators of cylinder-filling plants in the northern region for concerted action to monopolize the market for delivery and installation of cylinder-packed liquefied petroleum gas

Chinese Taipei

Complaint against operators of cylinder-filling plants in the northern region for concerted action to monopolize the market for delivery and installation of cylinder-packed liquefied petroleum gas

Key Words:

liquefied petroleum gas, cylinder-packed gas, cylinder filling plants, united business association

Reference:

Fair Trade Commission Decision of May 8, 2003 (the 600th Commissioners' Meeting); Disposition Kung Ch'u Tzu No. 092073

Industry:

Gas Supply (3400)

Relevant Law:

Articles 14 of the Fair Trade Law

Summary:

1. This case originated in August of 1999 when a gas distributor whose business had been recently legally established inquired of 21 cylinder-filling plants in Taoyuan and north-lying areas about cylinder filling and delivery (hoping to be supplied gas by the cylinder-filling plants). Failing to receive the consent of any, the distributor filed a complaint with the Fair Trade Commission (FTC) alleging possible concerted action and boycott by the cylinder-filling plants of the northern region in order to monopolize the market. Failing to obtain gas through normal channels, the distributor had further managed to obtain a supply through private agreement with other distributors, but before long those distributors came under pressure from a number of cylinder-filling plants to prevent them from offering any further assistance in obtaining gas supplies, while gangster thugs proceeded to the distributor's place of business to demand the distributor cease operation, making it impossible to continue its business.

2. FTC's findings after investigation: About 30 cylinder-filling operators had been established over time in the area from Hsinchu to the north. In April 1999, 16 cylinder-filling operators from Keelung and Taipei and 14 from the Taoyuan/Hsinchu area jointly established organizations in their own areas (the Northern Business Association and the Taoyuan Business Association, commonly called United Business Associations) which established joint bank accounts and made contributions to a market stabilization fund. Thereafter they began engaging in concerted actions, and entered into subsidization agreements to meet the goal of restricting competition between the members in a given region and to prevent mutual cross-regional competition. Due to the provisions in the fire code regarding cylinder-filling operations, gas distributors are required to obtain high-pressure gas cylinder storage permits as a prerequisite for operation. But acquiring land for cylinder storage yards and the funds required make it difficult for distributors to set up such facilities, and most depend on the cylinder-filling plants to provide them; the cylinder-filling plants thereby used their advantageous position to achieve their goal of concerted action to raise prices. Plant operators also entered into mutual agreements restricting the ability of distributors to freely switch between their gas suppliers and to prevent plant operators from cutting prices to attract customers; they even demanded that distributors raise their retail prices. In order to achieve their goal of concerted action to raise prices for cylinder delivery and installation, cylinder plant operators held meetings on an irregular basis to reach agreements having the effect of controlling the entire cylinder-packed gas market in the northern region. It was found that the “united business associations” set up by the cylinder plant operators in Taipei City, Taipei County and the Keelung area had established “five-man teams” who on a long-term basis extracted a certain percentage from the price of each kilogram for the fund, which was to carry out measures for price stabilization in the market. If distributors did not abide by the rules of the business associations, or if they switched to another gas supplier or cut prices to attract customers, the business associations would use their own employees and vehicles to deliver gas at even lower prices to the area in which the distributor operated its business. Otherwise gangster thugs would be called in to intervene, using intimidation or wrecking shops to bring the distributors back into line and to realize their final goal of stabilizing and raising retail prices for cylinder-packed gas, while at the same time enabled the cylinder plant operators to raise prices for delivery and installation to gain even greater profits. To discourage any reaction from the downstream distributors, cylinder plant operators would dispatch personnel to various areas to resolve disputes between distributors about grabbing customers and to demand that the distributors raise prices on their cylinders to pass on the price increases to the end consumers, thus facilitating their own collection of cylinder-filling fees. If the distributors were unwilling to increase the delivery and installation fees, they were threatened with interruption in supply. In addition, the distributors had no freedom to choose any other cylinder plant operator, as any attempt to switch would be rejected by other operators on various excuses, thereby freezing the relationships between trading counterparts and restricting market competition. As the methods of the Taoyuan area cylinder plant operators were largely similar to the above, the competitive mechanisms in the entire northerly region market for cylinder-packed gas were severely impacted and the rights and interests of millions of citizens infringed.

3. Reasons for disposition:
(1) The various respondents were enterprises in a competitive relationship with each other which established organizations and reached agreement on raising the rates for installation and delivery by the downstream distributors, and imposed restrictions on competition between enterprises as well as restricting the trading counterparts of distributors. These acts were sufficient to disrupt the supply and demand functions in retail pricing and delivery and installation of gas cylinders in the northern region, violating Article 14 of the Fair Trade Law prohibiting concerted action.
(2) In determining the amounts of the administrative fines to be imposed, the FTC considered the scope of operations of the various enterprises, their profitability, degree of cooperation with the investigation, and whether they took the lead in the violations or had previous records of violations. As the Taipei, Taoyuan, and Keelung areas belong to the same cylinder gas market, dispositions were issued respectively pursuant to the fore part of Article 41 of the Fair Trade Law. Pei Yi Hsing Ye Co., Ltd. and Ning Yang Cylinder Gas Co., Ltd. were each issued fines of NT$25 million; Pei Tao Cylinder Gas Storage and Delivery Co., Ltd. was issued an administrative fine of NT$24 million; Tai He Enterprise Co., Ltd. was issued an administrative fine of NT$20.4 million; Gao Hsing Enterprise Co., Ltd. and Ri Hua Cylinder Gas Co., Ltd. were issued administrative fines of NT$NT16.8 million; Yang Ming Shan United Cylinder Gas Co., Ltd. and Tong Ta Enterprise Co., Ltd. were issued administrative fines of NT$15.12 million; Northern Gas Co., Ltd. and Liu Tao Enterprise Co., Ltd. were issued administrative fines of NT$13.2 million; Tao He Cylinder LP Gas Co., Ltd., He Fa Gas Co., Ltd., Hung Chi Cylinder Gas Co. Ltd., and Liu Tung Enterprise Co., Ltd. were issued administrative fines of NT$11.88 million; Te Chi Tai Enterprise Co., Ltd. and Chi Ta Cylinder Gas Co., Ltd. were issued administrative fines of NT$9.6 million; Hsing Hai Petroleum Gas Co. was issued an administrative fine of NT$9.5 million; Chu Lung Enterprise Co., Ltd., An Hsiang LP Gas Plant, Chang Cheng Petroleum Gas Co., Ltd., Wan Lung LP Gas Co., Ltd. and Lian Rui Cylinder Gas Co., Ltd. were issued administrative fines of NT$8.64 million; Lian Yi LP Gas Co., Ltd. was issued an administrative fine of NT$6.91 million; Jung Hsing Gas Co., Ltd. was issued an administrative fine of NT$6 million; Tung Ta Hsing Enterprise Co., Ltd., Shan Meng Enterprise Co., Ltd., Chung Ting LP Gas Co., Ltd. and Fu Kang LP Gas Co., Ltd. were issued administrative fines of NT$5.4 million; Lian Ta Energy Co., Ltd. was issued an administrative fine of NT$3.02 million; Li Chuan Gas Co., Ltd. was issued an administrative fine of NT$2.16 million.

Appendix:
Pei Yi Hsing Ye Co., Ltd.'s Uniform Invoice Number: 86927084
Ning Yang Cylinder Gas Co., Ltd.'s Uniform Invoice Number: 43690413
Pei Tao Cylinder Gas Storage and Delivery Co., Ltd.'s Uniform Invoice Number: 89702834
Tai He Enterprise Co., Ltd.'s Uniform Invoice Number: 18617301
Gao Hsing Enterprise Co., Ltd.'s Uniform Invoice Number: 33823266
Ri Hua Cylinder Gas Co., Ltd.'s Uniform Invoice Number: 43632370
Yang Ming Shan United Cylinder Gas Co., Ltd.'s Uniform Invoice Number: 31204612
Tong Ta Enterprise Co., Ltd.'s Uniform Invoice Number:
Liu Tao Enterprise Co., Ltd.'s Uniform Invoice Number: 27013112
Northern Gas Co., Ltd.'s Uniform Invoice Number: 84945713
He Fa Gas Co., Ltd.'s Uniform Invoice Number: 43098995
Tao He Cylinder LP Gas Co., Ltd.'s Uniform Invoice Number: 45007653
Hung Chi Cylinder Gas Co., Ltd.'s Uniform Invoice Number: 89321737
Liu T'ung Enterprise Co., Ltd.'s Uniform Invoice Number: 23779966
Chi Ta Cylinder Gas Co., Ltd.'s Uniform Invoice Number: 34007426
Te Chi T'ai Enterprise Co., Ltd.'s Uniform Invoice Number: 43823336
Hsing Hai Petroleum Gas Co., Ltd.'s Uniform Invoice Number: 33205454
Lian Rui Cylinder Gas Co., Ltd.'s Uniform Invoice Number: 34239306
Chang Cheng Petroleum Gas Co., Ltd.'s Uniform Invoice Number: 27028804
Chu Lung Enterprise Co., Ltd.'s Uniform Invoice Number: 00262453
An Hsiang LP Gas Plant's Uniform Invoice Number: 02012946
Wan Lung LP Gas Co., Ltd.'s Uniform Invoice Number: 84675871
Lian Yi LP Gas Co., Ltd.'s Uniform Invoice Number: 97044813
Jung Hsing Gas Co., Ltd.'s Uniform Invoice Number: 44420374
Shan Meng Enterprise Co., Ltd.'s Uniform Invoice Number: 38001465
Tung Ta Hsing Enterprise Co., Ltd.'s Uniform Invoice Number: 33828522
Chung Ting LP Gas Co., Ltd.'s Uniform Invoice Number: 89720241
Fu Kang LP Gas Co., Ltd.'s Uniform Invoice Number: 16230823
Lian Ta Energy Co., Ltd.'s Uniform Invoice Number: 12810552
Li Chuan Gas Co., Ltd.'s Uniform Invoice Number: 16517615

Summarized by Wu, Ming-Shiou; Supervised by Tso, Tien-Liang