The Taiwan Flour Mills Association violated the Fair Trade Law by refraining member companies from price competition through a price increase concerted action

Chinese Taipei

Case:

The Taiwan Flour Mills Association violated the Fair Trade Law by refraining member companies from price competition through a price increase concerted action

Key Words:

flour, wheat, processing costs, refraining member companies from price competition, price increase concerted action

Reference:

Fair Trade Commission Decision of December 13, 1995 (the 218th Commission Meeting), Disposition (85) Kung Ch(u Tzu No. 005

Industry:

Flour Industry (1152)

Relevant Laws:

Article 19(iv) of the Fair Trade Law

Summary:

1. To stabilize prices, the authority has set up a price-stabilizing fund for imported wheat. With this fund, the authority makes necessary purchase of import wheat when the price is low or subsidies when the price is high. The authority has also set a stabilized price for flour, a product of wheat. Due to competition, however, the price set by local flour mills actually fluctuate below such stabilized price, and flour mills can hardly set their flour price above the stabilized price. The price stabilizing fund is utilized by the Council of Agriculture and other relevant authorities. The present issue of the case was originated from the price increase adopted at the 71st Price-Stabilizing Fund Committee Meeting. The meeting was held by the Council of Agriculture on November 10, 1995 to raise the stabilized price of wheat from US$195 per ton to US$245 effective on November 14 and to raise a stabilized price of flour effective on January 1, 1996. This price fluctuation has triggered considerable speculation on the market and much general concern in the society regarding the price increase.

2. According to the investigation, learning of the authority's government's intention in price increase, the Taiwan Flour Mills Association (hereinafter referred as "TFMA") had called the 13th Meeting of the Committee for Joint Purchase Operations and Processing Techniques under the TFMA on November 6, 1995 prior to the authority's meeting. During the TFMA meeting, reports on increase of processing, management and marketing costs of flour mills for the past seven years were presented. As to the increased processing costs not covered by the new stabilized price of flour, a resolution was reached, allowing each member mill to unilaterally increase their prices to include its own costs, on the condition that any price increase should not exceed the ceiling of the stabilized flour price US $195 assessed under the price-stabilizing standard. As a result, flour mills, one after another, began to increase flour prices in the middle of November 1995, after the authority's adoption of price increase in wheat.

3. Article 19(iv) of the Fair Trade Law states, "an enterprise may not cause, by coercion, inducement with profit, or other improper means, another enterprise to refrain from competing in price, or to take part in a combination or a concerted action. By calling a meeting and allowing each member mill to unilaterally raise their prices to include its own costs prior to the authority meeting, the Taiwan Flour Mills Association has caused a price increase in flour. The Association not only intended to raise the flour prices simultaneously, but also induced the member mills to raise the flour prices collectively. The sale price of flour mainly includes the wheat price and the processing cost. The wheat price is inclined to be unanimous due to the joint purchase of import wheat. The Association in essence impeded competition in the flour market by refraining its member mills from competing in price and inducing them to take part in a price increase concerted action with improper means. Therefore, the Association violated Article 19(iv) of the Fair Trade Law.

Summarized by Wu, Teh-sheng
Supervised by Shih, Chin-tsun

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