Techeng Company's monopoly of the gravel sales in southern Taiwan

Chinese Taipei

Case:

Techeng Company's monopoly of the gravel sales in southern Taiwan

Key Words:

monetary inducement by improper means, concerted action

Reference:

Fair Trade Commission Decision of April 10, 1992 (the 25th Commission Meeting); Disposition (81) Kung Ch'u Tzu No. 003

Industry:

River Gravel Mining Industry (0921)

Relevant Laws:

Article 19(iv) of the Fair Trade Law

Summary:

1. It was complained to the authority that "the owner of the Techia Gravel Site and the owner of the Shengyu Gravel Site formed a joint venture and included a dozen other gravel sites into the cartel in Likang Township." In addition, some media also reported that the gravel mining industry would reduce output collectively and raise prices in concert, which would appear to contravene the prohibition of the Fair Trade Law on concerted action.

2. As part of its duty, the Commission took the initiative to visit the gravel mining areas throughout Taiwan in order to look into the production and marketing of the gravel industry. The investigation showed that in September 1991, the responsible persons of the two companies located in the Likang Township in Pingtung County, that is Wang Hung-lin of the Shengyu Gravel Company, and Chiu Sheng-hung of the Techia Company, together set up an enterprise called Techeng Company, which started operations in January 1992. Wang Yuan-lin served as chairman of the company, and Chiu Sheng-hung as president. The actual operation was in charge by Wu Yi-lang as vice president while Chiu Sheng-hung.

Techeng Company reached an agreement with the following enterprises operating in Kaohsiung and Pingtung areas: Shengyu Gravel Company, Hsiehchen Company, Fucheng Company, Juisheng Gravel Company, Hsiangyu Gravel Company, Haochuan Gravel Company, Shanwaishan Development Company, Tiencheng Building Materials Company, and Kuangfeng Industrial Company. All the said companies agreed to provide gravel they mined to the Techeng Company for distribution while the latter would offer guaranteed acquisition with different amounts of earnest money. Other members of the industry were thus excluded from the competition in the gravel market. On the other hand, the gravel produced by the Likang and Chishan areas accounted for nearly 90% of the quantity demanded by the region to south of Chiayi. Since its establishment, Techeng Company had been responsible for the distribution of gravel in this said region, so it was obviously in a position to control prices. Furthermore, Techeng Company had another agreement with the suppliers of gravel, according to which, if the supplier was unable to deliver the quantity of gravel agreed upon so that Techeng Company had to purchase from other suppliers, the aforesaid supplier must reimburse Techeng Company the transportation costs at NT$ 20 per cubic meter. This served to restrain Techeng Company's affiliated suppliers from supplying other members of the industry.

However, if Techeng Company failed to purchase up to the quantity of gravel agreed upon in a certain month, the difference could be carried forwarded to the quota of next month. The investigation also revealed that Techeng Company's short term strategy was to establish a monopoly and monopsony position in the supply of Kaohsiung and Pingtung areas while its long term strategy aimed to enter into uniform sales arrangements with long term contracted customers in the gravel market such as concrete pre-mixing factories, asphalt mixing factories, cement processing factories and major civil engineering projects in the six-year National Development Plan. In other words, Techeng Company planed to extend its monopoly of the spot gravel market to the market of long term contracts.

3. As the information filed in the complaint was proven to be true by the investigation, the Commission made the following decision: Techeng Company's act of inducing the thirteen gravel mining enterprises in the Kaohsiung and Pingtung areas to take concerted action in the distribution of spot gravel by undue means such as monetary inducement in the form of earnest money has seriously affected the fair competition in the spot gravel market in the Kaohsiung and Pingtung areas, thus constituting a violation of Article 19(iv) of the Fair Trade Law.

　

Summarized by Huang, Chung-chieh
Supervised by You, Su-su

Appendix:
Techia Gravels Site's Uniform Invoice Number: 22547671
Techeng Company is already dissolved.

＊＊: For information of translation, click here

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