Taiwan Regional Association of Dairy Processors was complained in violation of the Fair Trade Law

Chinese Taipei

Case:

Taiwan Regional Association of Dairy Processors was complained in violation of the Fair Trade Law

Key Words:

fresh milk, business tax, concerted action

Reference:

Fair Trade Commission Decision of April 2, 1997 (the 283rd Commission Meeting); Disposition of (86) Kung Chu Tze 063

Industry:

Dairy Manufacture (1120)

Relevant Laws:

Article 14 of the Fair Trade Law

Summary:

1.The government announced in February 1995 that the dairy industry would be exempted from business tax beginning March 1, 1995. Newspapers and consumers complained that the Taiwan Regional Association of Dairy Processors (the Association) held a meeting and decided to take a concerted action not to reduce their selling price. Further complaint indicated that some dairy product suppliers stopped supply to some supermarkets which reduced their prices in response to the tax exemption on dairy products on March 1. The Fair Trade Commission initiated an investigation on the alleged role and actions taken by the Association.

2.Investigations showed that the Association held a meeting -- the 8th committee meeting of the 6th Dairy Product Research and Development Committee -- on February 23, 1995. Representatives from a total of 17 dairy manufacturers attended the meeting. Among other issues discussed, participants talked about the under-pricing of local dairy products and rising costs for packaging and for recycling waste containers. They believed these factors increased costs for the dairy industry and caused them difficulty in operation. The 5% business tax exemption would mean only a reduction of 1% on their pricing. Most participants at the meeting agreed that, despite the exemption of business tax, the selling price for dairy products should not be reduced.

3.After this meeting, some dairy product suppliers told supermarkets that the business tax exemption did not create any leeway for a reduction on the selling price. Some supermarket operators, considering it necessary to reflect the business tax exemption from the selling price, reduced prices at their own discretion on March 1. These supermarket operators asked the diary product suppliers to reduce prices as well. However, some dairy product suppliers with considerable market power resorted to an abrupt action to cut off supply, which created material impact on the market.

4.After that meeting, the Association compiled a report on the positions and requests of the Association, signed by the chairman of the Association. The report listed its position on the exemption of business tax on fresh milk and why there was no room for price reduction. The report was presented to the government and distributed among members of the Association and to the media, as the basis for its position on no reduction of the selling price.

5.The action by the Association is disputable because it took the lead in guiding dairy manufacturers to take a concerted action at a time when it had no clear knowledge of whether its members could reflect the business tax exemption on their products or not. In light of the fact that the committee is a permanent body of the Association, the committee's meeting was an official meeting of the Association. The Association is thus deemed the subject unit in taking the concerted action, and is given this disposition as the Fair Trade Law prescribes.

　

Summarized by Wu, Teh-sheng
Supervised by Shih, Jin-tsung

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