An investigation initiated by the Fair Trade Commission into suspected concerted action by air cargo transport enterprises in hiking rates for shipping air cargo to the United States, in violation of the Fair Trade Law
Chinese Taipei
Case:
An investigation initiated by the Fair Trade Commission into suspected concerted action by air cargo transport enterprises in hiking rates for shipping air cargo to the United States, in violation of the Fair Trade Law
Key Words:
air transport, peak shipping season, port strike
Reference:
Fair Trade Commission Decision of April 24, 2003 (the 598th Commissioners’ Meeting)
Industry:
Civil Air Transportation（5510）
Relevant Law:
Summary:
1. On 12 November 2002 Legislator Jian Jhao-dong called a news conference and, noting that current air cargo shipping rates to the United States had nearly quintupled, voiced suspicions that the relevant airlines may have acted in concert in raising their air cargo rates. He requested for the Fair Trade Commission’s (FTC’s) investigation.
2. The FTC found that cargo shipping fees of air cargo transport enterprises are effectively reported to the Ministry of Transportation and Communications (MOTC) through the maximum fee standards for different routes and cargo weights set by the International Air Transport Association on air cargo transport enterprises operating on most international routes. This case involved two market leaders, EVA Airways Co., Ltd. (EVA Airways) and China Airlines Co., Ltd. (China Airlines), who were both Chinese Taipei-registered carriers and confirmed on the above [mechanism]. In practical operations, carriers need not report to the MOTC with respect to their going rates, set on the basis of market competition, supply and demand and other factors, as long as the rates are within the abovementioned maximum fee standard. Upon further inquiry, EVA Airways and China Airlines stated that the rate hikes beginning in October 2002 had been due to the combined effect of the arrival of the traditional peak shipping season and the U.S. West Coast port strike, which prompted businesses to have their US-bound sea cargo shipments sent by air, thus boosting demand beyond capacity and resulting in varying degrees of price hikes in accordance with the market principle of supply and demand. Further, considering the opinion of the MOTC, the competent authority, that “investigation has found that the major reason behind this air cargo rate increase has been the concurrence of the port strike on the U.S. West Coast and the peak air cargo season, causing demand to exceed cargo space on flights from Taiwan to the U.S. West Coast and, in accordance with the market supply and demand mechanism, rates have accordingly risen”; and “the international air cargo market is currently under free competition and, consequently, relevant rates will remain consistent with the market’s supply and demand mechanism and undue government interference is inappropriate,” we find that the abovementioned carriers’ rates since October 2002 remained within the air cargo fee standards approved and recorded with the competent authority and that there were indeed demand-driven market forces resulting in the air cargo rate hike in response to the peak season and the U.S. West Coast port strike.
3. Lastly, it was found that EVA Airways and China Airlines each raised rates on cargo bound for the U.S. West Coast twice beginning in October 2002; EVA Airways by 15% on 10 October and from 20-25% on 1 November; and China Airlines by 15% on 16 October and 20% on 31 October. As the timing and amounts of the rate increases differ in each instance, there was no specific evidence that the carriers agreed to act in concert in raising rates. Furthermore, in addition to the two national carriers, a number of foreign carriers also carry cargo on routes between Taiwan and North America, offering consumers ample room for selection, comparison and negotiation; thus it was difficult to find that these carriers influenced the market’s supply and demand function through concerted action.
Appendix:
EVA Airways Co., Ltd.’s Uniform Invoice Number: 23225229
China Airlines Co., Ltd.’s Uniform Invoice Number: 11145904
Summarized by Yeh, Su-Yen; Supervised by Hou, Vh-Hsien