Huafeng Steel Forging Factory Co. Ltd. [hereinafter referred to as "Huafeng Company"] violated the Fair Trade Law by using improper means to make other enterprises to participate in a concerted action

Chinese Taipei

Case:

Huafeng Steel Forging Factory Co. Ltd. [hereinafter referred to as "Huafeng Company"] violated the Fair Trade Law by using improper means to make other enterprises to participate in a concerted action

Key Words:

concerted action, invitation for bidding, improper means

Reference:

Fair Trade Commission Decision of November 1, 1995 (the 212nd Commission Meeting); Disposition (84) Kung Chu Tzu No. 161

Industry:

Metalwork manufacturing industry (2170)

Relevant Laws:

Article 19(iv) of the Fair Trade Law

Summary:

1. On March 11, 1995, Huafeng Company responded to the Marine Corps' invitation to bid for PC4098 LVT caterpillar treads, where a total of six bidders had registered to participate in the bidding. After the procurement unit announced the beginning of the bidding process, the respondent with the intent to abort the bidding asked three of the registered bidders to cooperate with it by not submitting bids and "promised to give them some reward afterwards." As a result, only two bidders submitted bids which led to the abortion of the bidding and the respondent was complained to have violated the Fair Trade Law.

2. In order to find out whether Huafeng Company had caused other enterprises to cooperate with it in sabotaging the bidding by improper means, the Commission made inquires into enterprises involved in this case and referred to video tapes provided by the General Headquarters of the Marine Corps. The results of these investigation showed that it was true that Huafeng Company along with other three bidders did not submit bids on March 11, 1995. The Commission was informed that Huafeng Company indeed asked other bidders not to submit bids and promised to give them some reward afterwards because it had not obtained an experimental order permit. The bidders in question agreed to Huafeng Company's request for the sake of fellowship.

3. The provision of Article 19(iv) of the Fair Trade Law provides: An enterprise shall not commit to 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 that impede fair competition.

In this case Huafeng Company for the purpose of aborting the bidding and by promising to offer some "reward afterwards" asked those participating bidders not to submit bids. Despite Huafeng Company's claim that the aforesaid "reward" referred to mutual cooperation in their businesses in the future, such promise was tantamount to giving its competitors expectant profits, thus influencing their decisions. In view of the fact that the bidders involved in this case had attended the bidding twice respectively on March 11 and 17, 1995, and actively engaged in planning preparatory work for the bidding, they would not have given up participating in the competitive bidding but for the expectant profit promised by Huafeng Company. So the offer of inappropriate consideration proposed by Huafeng Company as means of competition fitted the description of "improper means" in Article 19(iv) of the Fair Trade Law.

4. Huafeng Company offered inappropriate consideration to induce other bidders to abort the bidding by means of joint omission, thus influencing the trading opportunity available in the bidding. The aforesaid competitive means used by Huafeng Company to cause other bidders to participate in a concerted action was found to fit the description of Article 19(iv) of the Fair Trade Law, which was related to "causing other enterprises to participate in concerted action by improper means."

5. Though Huafeng Company's strategy of sabotaging the bidding while waiting for its acquisition of the experimental order permit did not necessarily guarantee that it would win the trading opportunity available in this case and successfully exclude its competitors from participating in the bidding, to those who complied with the rules of fair competition, their chance of winning the bidding had been damaged and they had to sustain losses to a certain extent such as the loss of short term interest, the cost of re-entry into the bidding or other opportunity costs. Furthermore, the procurement unit was forced to develop another set of bidding procedure, thus affecting trading order in the market. In addition, with regard to Huafeng Company's market position, it was not the sole supplier in the market, but in view of the fact that it had been a sole supplier of the product in question prior to 1994, it was still in the position of exerting considerable influence on the market. Its aforesaid acts of aborting the bidding so as to wait for approval as acceptable of its product purchased for trial purposes, with the intent to maintain its control over the specific market violated the market mechanism and the interest of other competitive enterprises who lawfully participated in the bidding, thus it can be concluded that such acts are likely to impede fair competition."

6. In conclusion, the acts by Huafeng Company in this case violated Article 19(iv) of the Fair Trade Law, and should be punished pursuant to the first half of Article 41 of the same Law.

　

Summarized by Liu, Nai-jung
Supervised by Yang, Chia-chun

Appendix:
Huangfeng Steel Forging Factory Co. Ltd.'s Uniform Invoice Number: 33760261

＊＊: For information of translation, click here

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