Hualien County Gravel Association colluded with local gangsters in an attempt to control the "quarrying" and "sales" of gravel in the Hualien area, affecting the trading order of market supply and demand in Hualien’s gravel market, in violation of Article 14 of the Fair Trade Law
Case:
Hualien County Gravel Association colluded with local gangsters in an attempt to control the "quarrying" and "sales" of gravel in the Hualien area, affecting the trading order of market supply and demand in Hualien’s gravel market, in violation of Article 14 of the Fair Trade Law
Key Words:
allocating quantities of material resources, dock dispatching fee, "Northbound Eastern Gravel Visa Discount"
Reference:
Fair Trade Commission Decision of September 19, 2003 (the 619th Commissioners' Meeting); Disposition (92) Kung Chu Tzu No. 092162
Industry:
River Gravel Quarrying (0621)
Relevant Law:
Article 14 of the Fair Trade Law
Summary:
1. The Fair Trade Commission (FTC) heard that the chairman of the Hualien County Gravel Association was colluding with local gangsters to control the "quarrying" and "sales" of the gravel in Hualien. From 2003 on, the Hualien County Gravel Association had been requesting all local tenderers who won the open tender for joint gravel quarrying posted by the 9th River Basin Management Bureau of the Water Resources Agency, Ministry of Economic Affairs, to give the quarrying rights to the Association. The Association would then allocate the quarrying quantity for each member and charge NT$5 per ton as a maintenance fee. It also designated as general contractor for excavator machinery one particular person who charged a fee of NT$7 per ton. From 1 March 2003 on, the Association began to handle all the northbound sales of Hualien area gravel and allocated the shipping quantity for each company. The Association also took charge of collecting payments from buyers and raised the price of gravel delivered to the Hualien dock from NT$130 to NT$135 and took the NT$5 price increase as the Association’s own profit. Those who objected to these conditions were visited by gangsters, so they feared to speak out despite their indignation. Resisters would furthermore be denied issuance of the "Northbound Eastern Gravel Visa Discount" issued by the Association. Because Hualien gravel has a tremendous impact on the gravel supply to the western region, the FTC initiated the investigation.
2. The FTC confirmed the following facts in its investigation: Prompted by the dual factors of the "Northbound Eastern Gravel Shipment Reserve Zone" and the "Policy of Limited Import of China Gravel" announced by the central government, the Hualien County Gravel Association had conducted several meetings with the "Northbound Eastern Gravel" project companies by late February 2003 for purposes of allocating the quarrying territories and quantities, and set the quarrying cost at NT$27 per cubic meter. Based on the allocation, it set terms for each company regarding sales quantity, percentage, and the NT$135 per ton price of gravel delivered to the Hualien dock, and added an extra dock dispatching fee of NT$1.15 per ton into the handling charge. Furthermore, the Association led five dock dispatching companies and the quarrying companies of the "Northbound Eastern Gravel" project to jointly increase their fees and gravel prices to downstream gravel traders. The Association also produced a series of statistical forms such as a "Gravel Reserve Zone Itemized Allocation List." Considering that the Association actually notified its members to raise gravel prices by approximately NT$20 per ton, and notified downstream customers and arranged with them an increase in the price of gravel delivered to the Hualien Harbor dock to NT$135 per ton, it is evident that the Association did restrict its member enterprises in the "Northbound Eastern Gravel" project in costing, pricing, quantity, and so forth. The restraints on sales quantities and the concerted price increase in the "Northbound Eastern Gravel" project were subsequently implemented for only less than one month because of uncertainty on the policy on gravel imports from China and insufficient acceptance by customers. However, the increase, from 1 March 2003, in the Hualien Harbor handling charge and other fees to NT$44 per ton, including a newly added dock dispatching fee of NT$1.15 per ton, set by the Association, is still being collected at present, which increase the operating costs of the quarrying enterprises.
3. Grounds of the disposition: Article 14 of the Fair Trade Law prohibits enterprises from acting in concert. Articles 7(1), 7(4) of the Law provide, respectively:
The term "concerted action" as used in this Law means the conduct of any enterprise, by means of contract, agreement, or any other form of mutual understanding, with any other competing enterprise, to jointly determine the price of goods or services, or to limit the terms of quantity, technology, products, facilities, trading counterparts, or trading territory with respect to such goods and services, etc., and thereby to restrict each other's business activities.
The term of a trade association to restrict activities of enterprises by means of its charter, a resolution of a general meeting of members or a board meeting of directors or supervisors, or any other means, is also deemed as horizontal concerted action as used in Paragraph 2.
The original price of gravel delivered to the dock of "Northbound Eastern Gravel" was from NT$110 to NT$115 per ton, and the price of sand not more than NT$130. Led by the chairman and the general director, the Association planned to set up a one-stop window for "Northbound Eastern Gravel." It increased the selling price to NT$135 per ton, regardless of whether for sand or gravel, and took NT$5 per ton to compensate those members located farther south to achieve its objective of restraining competition to jointly share in profits. The Association originally planned to have East Gravel Co. buy the gravel shipped north at the guaranteed price of NT$130 per ton, but gave up this plan due to insufficient finances of the Association and East Gravel Co. Consequently, the Association asked its members and downstream customers to accept the price increase. Certain downstream customers corroborated that they had been invited to the meeting to discuss the price increase on 27 February 2003, and some association members also testified that they had informed their downstream customers of the price increase of NT$20 per ton. Meanwhile, gravel companies in Penghu also confirmed that the gravel companies in Hualien did increase the price of gravel in March 2003. Because of the continuous prohibition on river gravel quarrying in the western region and the surplus in production of Hualien gravel, Hualien gravel (including crushed stone) has joined imported gravel from China as a major source affecting the domestic supply of gravel in recent years. The investigation confirmed that the Association engaged in restraint of competition, including allocating quantities of material resources, fixing the cost of materials, and demanding its members increase their prices, thereby affecting supply-demand and price competition in the Hualien gravel market. Irrespective of whether its members or downstream customers accepted the post-adjustment gravel pricing in the "Northbound Eastern Gravel" project and irrespective of the duration of the price adjustment, the Association's conduct impacted the gravel markets of the north and Penghu regions. The FTC therefore imposed a fine of NT$2 million on the Association in accordance with the fore part of Article 41 of the Fair Trade Law.
Summarized by Liu, Ginger; Supervised by Tso, Tien-Liang