Whether raising the price of the automobile coolant involves a concerted action or a monopolistic act
Chinese Taipei
Case:
Whether raising the price of the automobile coolant involves a concerted action or a monopolistic act
Key Words:
coolant, quota, business club, concerted action, tying
Reference:
Fair Trade Commission Decision of October 6, 1993 (the 105th Commission Meeting); Letter (82) Kung Er Tzu No. 53880
Industry:
other chemical product wholesale industry(5179)
Relevant Laws:
Article 14 of the Fair Trade Law
Summary:
1. The quota arrangement for the coolant imports adopted by the Industrial Development Bureau was complained to this Commission. In addition, the Consumer Foundation indicated that the price for the coolant was unreasonably high. The Freezer and air-conditioner Association of Taichung County also complained that the importers of the coolants raised the price. These cases were brought before the Commission for investigation.
2. Regarding the issue of whether the automobile-repairing industry was involved in raising the price of the coolant, the investigation shows as follows:
(1) Judging from the pricing method used by each repairing store, the time to adjust the price, the price scale and other factors, it is very difficult for the numerous repairing stores to have concerted actions on the price of the coolant. The reasons for the large increase in the price of coolant to a great deal is related to the practice in the repairing industry. In practice, the industry shares the same view that " the adjustment scale for the retail price shall not be too high", "the retail price can be adjusted when there is an increase in the import price", and " the raise of the repairing fee has to be in line with increases in cost of goods ". There was, therefore, no concerted action involved.
(2) The price of R12-type coolant, however did not as industry expected continue rising. During May and June of 1993 the Commission announced the result of the investigation into the price of the coolant from importation to sale for the purpose of transparency of the market information. (3) In addition, the Commission held a hearing with 15 major automobile companies on 16 July 1993 to discuss the relationship between the pricing of the coolant and the Fair Trade Law and reached the following conclusions: (i) With regard to the increase in the price of coolant at the end of last year and the beginning of this year, the automobile industry shall check on the reason for the raise, and consider lowering the price based on the situation that the cost of goods had decreased by one-third and to research the feasibility of the reduction of the price of the coolant. (ii) In researching and developing new coolant systems for new automobiles, it is necessary to improve research and development of the related technology for replacement parts and materials relating to replacement equipment for old automobiles. In this way consumers can be supplied with replacement coolant systems at economical prices. Then it will be possible to address the demanding international environmental policies relating to R12 anti-freeze.
3. Regarding the intent and the purpose of the conduct of Formosa Plastics Corporation in selling R12 tied with R22, there are two factors:
(1) The establishment of Formosa Plastics Corporation's CFC factory was in accordance with the government's investment regulations. In 1985, because of the resistance from the local residents relating to environmental protection, the construction of the factory was delayed. Formosa Plastics Corporation did not receive the certificate of the CFC registered factory and obtain the quota for production of CFT until April of 1992. Nevertheless, in late 1992 the contracting parties of the Montreal Convention started prohibiting the use of CFC which resulted in Formosa Plastics Corporation's great loss-- an estimate of over three hundred million NT dollars per year. Even so, Formosa Plastics Corporation adopted a " reasonably pricing with marginal profits " principle for R12 and also suggested its distributors to follow such principle. Since the distributors had suffered a great loss at the time when they began to sell R12, Formosa Plastics Corporation's suggestion was not accepted by the distributors. During the negotiation with the distributors, Formosa Plastics Corporation did seek advice from the Fair Trade Commission in connection with the resale price maintenance and realized that such arrangements are invalid under the Fair Trade Law. The price charged the R12 end user, therefore, solely depended upon the market.
(2) As the market price for R12 increased a great deal in December of 1992, it was also the time when some of distributors tied R12 with R22 to their new customers. In addition, under the investigation, the source of their R22 obtained from other importers was at an unreasonably low price. Therefore, Formosa Plastics Corporation also wished to obtain new customers through the above mentioned method.
4. In conclusion, as the time when the coolant market was not stable, in order to balance the demand and supply in the market and pursue more quota for coolant in the near future, the conduct of Formosa Plastics Corporation's tying was therefore justified and does not constitute "unfair competition". It was also understood that after the media reported Formosa Plastics Corporation's tying arrangement, it did not continue the aforesaid conduct any more.
Summarized by Lee, Yen-Hsi
＊＊: For information of translation, click here
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