Ten pre-mixed concrete companies in Ilan were accused of a concerted act to gain a monopoly
Chinese Taipei
Case:
Ten pre-mixed concrete companies in Ilan were accused of a concerted act to gain a monopoly
Key Words:
concrete, concerted action
Reference:
Fair Trade Commission Decision of August 28, 1998 (the 352nd Commission Meeting); Disposition Ref. (87) Kung Ch'u Tzu No. 200
Industry:
Premixed Concrete Industry (2632)
Relevant Laws:
Summary:
A citizen filed a petition to legislators and the Consumer Affairs Commission (CAC), alleging pre-mixed concrete companies in Ilan County of engaging a concerted action by raising the price of pre-mixed concrete in June 1996 from US$1,200~US$1,300 to US$1,500 per cubic meter. As the action was suspected as a concerted action to gain a monopoly, the petition was sent to the Fair Trade Commission (FTC). The FTC sent personnel to investigate the construction companies and asked the Ilan County Investigation Station to assist in obtaining evidence.
According to investigation results, the pre-mixed concrete market in Ilan County has a volume of 100,000 cubic meters per month and a value of NT$1 billion per year. Originally, there were five companies with sales volumes exceeding 15,000 cubic meters per month. This number rose to eight after three more companies joined the market, and rose again to ten after Te Fu Concrete Industrial Ltd., Co. (TF) set up Fu Te Concrete Ltd., Co. (FT) in 1996 to expand its market share, and Rung Hua Sha Shi Ltd., Co. (RH) obtained a contract to build a pre-mixed concrete plant. The fact that the companies continued to be profitable despite the increase in competitors and decrease in sales volumes and that their prices were high compared with those in nearby regions raised concerns that competition in the market was not functioning properly. In addition, construction companies admitted that prices charged by pre-mixed concrete companies were about the same, thus they were likely engaging in concerted action to gain a monopoly.
According to the Ilan County Investigation Station, Yi Ku Ltd., Co. (YK), Yi Chien Enterprise Ltd., Co. (YC), Li Tai Premixed Concrete Industrial Ltd., Co. (LT), TF, Hsiang Cheng Industrial Ltd., Co. (HC), Ch'in Lung Concrete Factory Ltd., Co. (CL), Mei Chou Concrete Industrial Ltd., Co. (MC) and Yao Wei Ltd., Co. (YW) (i.e. Chio Wu Construction Enterprise Ltd., Co. (CW)) made an agreement at YK at the end of March 1996, the purpose of which was to monopolize and unify prices to boost profits. It was agreed that shipments would be made based on the unified prices and allotted sales volumes. Evidence included a chart of actual shipment volumes between June 16, 1996 and June 18, 1996 headed with the words "Agreed Shipment Volumes" using the following codes: TK (#1); TF (includes FT) (#2); YW (i.e. CW) (#3); YC (#4); MC (#5); HC (#6); LT (#7); and CL (#8). From January to July 1997, ten companies kept an agreement on prices. Other evidence included a notification issued by YC on August 5, 1996 to the other companies in the industry headed with the words "Quotation Notification Chart," informing them that bids for pre-mixed concrete for the Tang Tu Chiang Project of Luo Fang, Luo Wei, and Chien Feng on Hsi An St. in Luo Tung Ch'en should be quoted at NT$1,500 per cubic meter and advising them to cooperate. Evidence also included Wu Chin-fa's testimony, in which he admitted to producing the charts and issuing the notification.
Concerted action
Restriction of competition on price: After prices were agreed on, discounts were given to preferred companies to prevent transaction prices from being the same. All engaged companies did take steps to avoid price competition.
Restriction of competition on volume: Wu also admitted that allotted shipment volumes in the chart were adjusted after RH joined in August and September 1996. The shipment volumes and prices of the companies were mutually audited, compiled by Wu Chin-fa and faxed back to each company. In addition, Chiu Wen-ku (VP of MC), Yang Yen-chao (responsible person of LT), Lin Hsiu-yuan, (CEO of RH) and Chang Chung-yi (responsible person of CL) admitted that ten companies in the industry agreed to mutually purchase materials at NT$1,400 in the first half of 1997. As mutual purchasing of materials was not necessary, it was evident that the companies had made some kind of agreement prior to dispatching the materials. The mutual management of materials served to restrict competition on volume and the agreement on prices of materials served to raise concrete costs and make them more consistent. The mutual auditing would serve to prevent price cutting and the raise prices. These acts were severe concerted action. They violated Article 14 of the Fair Trade Law (FTL) prohibiting concerted action and were thus disposed according to the first part of provisions in Article 41 of the FTL.
Summarized by Liu Chin-chih
Supervised by Tso Tien-liang
Appendix:
Yi Ku Ltd., Co. Uniform Invoice No.: 22245401
Te Fu Concrete Industrial Ltd., Co. Uniform Invoice No.:
42042170
Fu Te Concrete Industrial Ltd., Co. Uniform Invoice No.:
23695241
Chio Wu Construction Enterprise Ltd., Co. Uniform Invoice
No.: 42067093
Hsiang Cheng Industrial Ltd., Co. Uniform Invoice No.:
22584176
Mei Chou Concrete Industrial Ltd., Co. Uniform Invoice No.:
86923307
Yi Chien Enterprise Ltd., Co. Uniform Invoice No.: 84216519
Li Tai Premixed Concrete Ltd., Co. Uniform Invoice No.:
84236655
Ch'in Lung Concrete Factory Ltd., Co. Uniform Invoice No.:
84848607
Rung Hua Sha Shi Ltd., Co. Uniform Invoice No.: 86996624