Taipei City Public Bus Administration's procurement of complete air-conditioned buses excluded local manufacturers from the tender process in violation of the Fair Trade Law
Chinese Taipei
Case:
Taipei City Public Bus Administration's procurement of complete air-conditioned buses excluded local manufacturers from the tender process in violation of the Fair Trade Law
Key Words:
Procurement of big buses, Taipei City Public Bus Administration; mass production of complete buses, own brand of complete buses
Reference:
Fair Trade Commission Decision of 9 August 1995 (the 84th Commission Meeting); Disposition (82) Kung Chu Tzu No. 108
Industry:
Vehicle industry (3231)
Relevant Laws:
Article 19(ii) of the Fair Trade Law
Summary:
1. Background: Taipei City Bus Administration ["the Administration"] commissioned National Bureau of Trust to invite tenders for the procurement of 150 complete air-conditioned buses. The supplementary clauses of the Tender Guidelines provide that all manufacturers who submit tenders must have the ability to design a complete bus, own brand record of mass production, and an actual sales volume of over 250 complete buses within these years. At present, no local manufacturers qualify these criteria, so that local manufacturers as a matter of fact have been excluded from participation in tendering which violated the principle of fair competition.
2. The sanctioned party, the Administration, a subordinate to the Bureau of Transportation of Taipei City Government, is engaged in the operations of mass transportation services for Taipei City. By charging people who ride the vehicles in question a fare, it provides services which have market value. Therefore, the procurement activities it engaged in for the provision of mass transportation should be subject to the regulations of the Fair Trade Law. In response to the complaint that it excluded local manufacturers from participating in the tender by requiring all tenderers to provide complete buses which have their own brands and a record of mass production, the Administration explained that the reasons for the aforesaid requirements were to save procurement time and avoid phased procurement, i.e., three phases of procuring respectively chassis, air-conditioner, and body, thus delaying the time when the buses may be used. In addition, the rationale behind the requests that the type of bus for tender must have its own brand and a record of mass production was (1) to ensure the quality of the procured buses; (2) were there any defects found in the buses, the attribution of liability to the winner of the bid would be much clearer. However, according to the Industries Development Bureau and the Association of Vehicles, local bus manufacturers have been divided into three sectors, i.e., of chassis, body and air conditioner, and none of them has the actual record and competence to build a complete bus under their own brands. Moreover, 89.5% of 19 local bus transport operators, both publicly and privately run, have adopted the phased procurement system, and most operators claim that the bid winners have never been known to shirk liabilities when the quality of the procured buses had defect. Based on the aforesaid information, it can be found that the Administration's insistence on procuring only complete independent brand buses failed to reflect the actual situation in the market where local bus manufacturing industry completely relies on the division of labor, and the reasons the Administration cited also contradicted the procurement approach adopted by and experience of members of the industry, therefore no "due cause" as specified in this Law could be found in the case where the procurement in question excluded local manufacturers from participating in the tender. Furthermore, the actual performance evaluation in this case was based on the volume actually sold as a complete bus and under own brand, but as described above, currently no local manufacturer has ever produced complete buses under their own brands. As a result, the valuation criteria to be "sold as being a complete bus and under own brand" are indeed tantamount to excluding local manufacturers from participating in the tender.
3. The bus procurement conducted by the sanctioned party, the Administration, is a non-recurring and lump-sum acquisition under its annual established budget. Judging from the market share enjoyed by the number of buses procured by the Administration in 1992 and 1993, the procurement in question could have considerable impact on the demand and supply in the local bus market. Therefore, with regard to the bus procurement where the Administration was complained of setting limitations on the tenderers' eligibility, including the requirements for complete buses, owning own brands and the quota on the actual performance, due to the fact that these requirements did not fit the situation in the local bus manufacturing industry where the division of labor is the main method of production, the Administration was indeed involved in excluding local manufacturers from participation in the tender. On the other hand, the reasons the Administration argued for also contradicted the experience of the industry actually had in procurement and use of the said product. Therefore, in view of the dominant status the Administration enjoys in the local market of bus procurement, the aforesaid acts of imposing restrictions on the qualifications obviously impeded fair competition, which constitutes a violation of the provisions related to discriminatory treatment specified under Article 19(ii) of the Fair Trade Law.
Summarized by Lin, Ch'ing-tang
Supervised by Yung, Chia-chun
＊＊: For information of translation, click here
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