Several chain convenience stores jointly raised the price of canned carbonated beverages, in possible violation of the Fair Trade Law

Case:

Several chain convenience stores jointly raised the price of canned carbonated beverages, in possible violation of the Fair Trade Law

Keywords:

chain convenience store, jointly raising the price

Reference:

Fair Trade Commission Decision of December 23, 2004 (the 685th Commissioners'Meeting); Letter Kung Yi Tzu No. 0930009742

Industry:

Chain Convenience Stores (4753)

Relevant Law:

Article 14 of the Fair Trade Law

Summary:

1.	This case originated from the reports in local newspapers stating that the price of canned carbonated beverages sold at the chain convenience stores was raised from NT$ 18 to NT$ 20 on April 1, 2004. Swire Coca-Cola Beverages Limited (hereinafter referred to as "Coca-Cola") expressed that it did not raise the price of the canned carbonated beverages. Moreover, on the morning of April 7, the Fair Trade Commission (FTC) dispatched an officer to investigate the sales price of canned carbonated beverages at the business locations of four convenience stores which were President Chain Store Corporation (hereinafter referred to as "7-ELEVEN"), Taiwan FamilyMart Co., Ltd. (hereinafter referred to as "FamilyMart"), HiLife Co., Ltd. (hereinafter referred to as "Hi-Life"), and Fu Chun Convenience store Co., Ltd. (hereinafter referred to as "CIRCLE K"). According to the investigation result, the retail prices of Coca-Cola, Sprite, Fanta, HeySong root beer, Vitali Soda, and Milk Sidra were all NT$ 20 at these aforementioned convenience stores. In order to understand whether each convenience store violated the Fair Trade Law by jointly determining the sales price, the FTC initiated an ex-officio investigation.
2.	Upon the investigation, the FTC found that: The purchasing cost over the past 3 years of the major 5 chain convenience stores (which were 7-ELEVEN, FamilyMart, Hi-Life, CIRCLE K, and Nikomart Co., Ltd.) had not been adjusted, and the price was NT$ 18 per can for all of the stores. Hi-Life raised the price to NT$ 20 on March 31, 2004, while FamilyMart and Nikomart Co., Ltd. (hereinafter referred to as "Nikomart") did the same on April 1, 2004, 7-ELEVEN on April 2, 2004, and CIRCLE K on April 3, 2004. They all claimed that the reasons to raise the price were that the demand of canned carbonated beverages declined; the price of canned carbonated beverages at the cinemas, sight-seeing resorts, and vending machines was higher than the price of those at the convenience stores; and that the gross margin rate of canned carbonated beverages was lower than other beverages.
3.	Grounds for the disposition:   (1) The market of carbonated beverages has fewer market entry barriers and mostly has substitutability. It shall be quite difficult for the aforementioned convenience stores to separate other potential competitors from the market and continue the collusion. Moreover, carbonated beverages are not necessities for the livelihood of the public. The demand shall be respectably elastic. The sales growth volume was contrarily less than the corresponding period of the previous year after they raised the price. Additionally, the sales amount and profits derived from canned carbonated beverages possessed a very low ratio in the whole turnover and profits. The anticipated profits earned from the collusion were low. Therefore, the aforementioned convenience stores conspicuously had no strong motive or economic benefits to jointly decide on raising the price of canned carbonated beverages. With regard to the same price raising range by those convenience stores, the key question lies in whether it was a joint decision resulted from their consent or the rest convenience stores simply follow Hi-Life after it decided to raise the price. Since those convenience stores have not had multiple accidental parallel acts yet, it is difficult to make any judgment based on this one-time incidence of price raising. Moreover, the chain convenience stores can easily obtain the information regarding the fact that their competitors raise prices through carbonated beverage suppliers, media, and retail stores. According to the explanation provided by Coca-Cola, during its routine telephone interviews with chain convenience stores, it once incidentally mentioned the price fluctuation made by some chain convenience stores in early April to those that hadn't raised the price. Upon the knowledge of the price raising by other same businesses, those convenience stores also considered to follow up, which shall accord with the general commercial transaction habits. (2) In this case, there is no concrete evidence and inducement to jointly determine the price of canned carbonated beverages by "means of contract, agreement or any other form of mutual understanding." Therefore, it is still difficult to say that those chain convenience stores involved in a concerted action and violated Article 14 (1) of the Fair Trade Law based on the present evidence. However, in order to maintain trading order and consumers' interests, the FTC sent a letter to warn these companies not to be engaged in the act of consistent price adjustment, so that the violation of the Fair Trade Law may be avoided.

Summarized by Chen, Ei-Chen;

Supervised by Chen, Yuhn-Shan

Appendix:

None