Shin Lung Natural Gas Co., Ltd. was complained for its abuse of market position by improperly determining the fees for natural gas pipe laying work
Chinese Taipei
Case:
Shin Lung Natural Gas Co., Ltd. was complained for its abuse of market position by improperly determining the fees for natural gas pipe laying work
Key words:
natural gas, pipe laying work, obviously unfair
Reference:
Fair Trade Commission Decision of 7 January 1998 (the 323rd Commission Meeting); Letter (87) Kung Erh Tzu No 8604298-023
Industry:
Liquid Gas Supply Industry
Relevant Laws:
Article 24 of the Fair Trade Law
Summary:
The file complaint was as follows. The complainant had bought a home on the tenth floor of Building L of the Shan Hai Kuan [Mountain Sea Views] Residential Complex (the Complex) located in Keelung City. The builder of the Complex, Tung Yun Construction Company, applied for the construction of natural gas connection pipelines with the only provider of natural gas for that locale, Shin Lung Natural Gas Co., Ltd. (Shin Lung), which accepted work on the project and decided that the pipe laying work would cost NT$32,000. All purchasers of the units in the Complex were required to pay before 17 April 1997, or the pipe laying cost would increase to NT$35,000 starting on 1 May 1997. The complainant also called up Shin Lung and discovered that the per-house cost of laying pipes for one house or the whole 3,000 in the Complex was the same, NT$32,000 [no bulk discount]. The complainant therefore regarded Shin Lung as abusing its market position.
In accordance with the decision of the Fair Trade Commission’ 117th Commission Meeting, natural gas users may themselves choose a qualified contractor to work on the interior meter pipe laying related to natural gas supply. If on behalf of the users a gas-supplying business entrusted contractors to carry out the work, the users and the gas-supplying business should negotiate items that were chargeable or deemed "accessory services" and their costs. Moreover, based on the Energy Commission's opinion, chargeable items such as gas furnace service fees, delivery charges, and wall hole maintenance fees fell in the category of accessory services related to interior meter pipe laying work. Thus, before these services are carried out, the gas company must acquire the user's consent and negotiate with the individual user about the costs. As far as exterior meter pipe laying work is concerned, pursuant to its Business Rules, Shin Lung was directly responsible for the construction. According to opinions of the Energy Commission, chargeable items of such work shall be specified in gas enterprises' business rules. In addition, pursuant to Article 7 of the Statute Governing the Supervision of Public Utilities Run Privately and Article 27(4) of the Rules Governing the Management of Gas Business, the schedule of fees shall also be specified in the business rules. Nonetheless, in the Business Rules of Shin Lung, only Articles 20, 31 and 34 mention that the company [Shin Lung] may charge the users at its discretion pipeline subsidy fees, pipe laying fees (including design fees), application fees, drawing review fees, interior meter pipe inspection fees, activation fees charged when a gas meter is installed, renewed or restored, gas meter inspection fees, rentals or deposits for gas meters, and other related fees approved by other competent authorities. However, the same Business Rules did not prescribe the schedule of fees. According to the opinion of its overseeing authority, the Taiwan Provincial Government Department of Reconstruction, there is a wide variety in costs of exterior meter pipe laying work and the pipeline subsidy fees due to the difference in the pipe materials used and the number of users using the pipe invested, each gas business should negotiate with users about the costs based on the actual work situation and the length of the interior pipes involved.
In its investigation the Fair Trade Commission found Shin Lung in violation of due operational procedure. Neither have Shin Lung been entrusted by each user in the Complex to execute the interior meter pipe work nor did it actually send designers to visit the users to produce site drawings and measurements for estimating the cost of interior meter pipe work. Counting on its monopoly power, Shin Lung unilaterally decided to collect the same amount of fees for identical service items from all the users in the Complex without, negotiating with the users over the chargeable items and their actual costs based on the actual work situation in different households, or obtaining the users' consent to these matters beforehand. Shin Lung also inflated quotes for many service items, which ran counter to the principle of effective competition, and was an abuse of its own market position in dealing with its trading counterparts.
Furthermore, the investigation also showed that Shin Lung placed the accessory services items under the category of exterior meter pipe laying and execute the work itself without negotiating with the users or obtaining the users' consent. It also inflated the costs by inventing all sorts of items such as "mud refill fees" and difference in fees based on the class of equipment used. Its unilateral decision of the exterior meter pipe laying costs was also in breach of the principle of effective competition and an abuse of its market position in dealing with its trading counterpart.
Where the pipeline subsidy fees were concerned, according to the Provincial Department of Reconstruction, [gas business] shall negotiate with individual users about the cost taking into account the actual work situation such as the distance of each building in the Complex, and the difficulty of the work. The investigation, however, showed that Shin Lung informed the users of the fees they were supposed to pay through the builder, who was also in charge of collecting these payments. It was obvious that no negotiation with the users had taken place; nor had Shin Lung obtained the users' prior consent. Based on its monopoly power, Shin Lung charged the users living in the Complex the same amount of pipeline subsidy fees without going through the procedure of price negotiating, which again was an abuse of its market position.
In conclusion, Shin Lung, with monopoly power unilaterally determining to charge the same service items and the same amount of fees on all the residents users of the Shan Hui Kuan Complex and inflating the quotes for many service items without negotiating with each users on the items charged and the amount of fees, or obtaining the consent of each user in advance, was found to have violated Article 24 of the Fair Trade Law for the breach of the principle of efficiency competition and the abuse of its market position, which were also obviously unfair and could adversely affect trading order.
Summarized by Hung, Te-ch'ang
Supervised by Yu, Su-su
Appendix:
Shin Lung Natural Gas Co., Ltd.'s Uniform Invoice No. 00146877