Violation of Article 14 of the Fair Trade Law by Concerted Bidders in the Taiwan Provincial Water Company's Procurement of Liquid Chlorine
Chinese Taipei
Case:
Violation of Article 14 of the Fair Trade Law by Concerted Bidders in the Taiwan Provincial Water Company's Procurement of Liquid Chlorine
Key words:
liquid chlorine, concerted act, division of markets, accompanying bidders, conspiracy for sharing bid awards
Reference:
Fair Trade Commission Decision of January 7, 1998 (the 323rd Commission Meeting); (87) Kung Chu Tzu No. 036 of 3 February 1998
Industry:
Chemical Material Manufacturing Industry (2100)
Relevant Laws:
Summary:
Complaints alleged that the Seventh Regional Administration Division of the Taiwan Provincial Water Company (TPWC) handled 13 procurements of liquid chlorine in 1994. The base bid price was set between NT$12.14 and NT$13 per kilogram. One of the 13 bids, in which seven bidders participated, was awarded to Yuan Fu at the price of NT$9.5 per kilogram. In the other cases, from among Yuan Fu, Ho Chi Pen Yuan Company, Yuan T'ai Chemical Material Company and Hsing Mao Company, only two or three of the said companies participated in bidding. These companies were suspected of engaging in such concerted acts as joint price-setting and restriction on members' business activities.
The matter was submitted to this Commission for investigation. In addition to the four companies mentioned above, bidders collaborating in the TPWC's liquid chlorine procurements included another four companies: Yung Hua Te, Yuan Yung Hsing, T'ai He Chemical Material and Yi Hsin. To meet the TPWC‘s requirement that bidders must present manufacturer's authorization letters, the above bidders concerted, with the aim of dividing up the supply sources of liquid chlorine, in presenting the authorization letters from the following manufacturers: primarily Taiwan Chih Lu, Formosa Plastic, Yi Fang Chemical; and secondarily Taiwan Paper, and Hua Paper. Accordingly, Taiwan Chih Lu would supply the region south of Taichung. Formosa Plastic would supply the region north of Taichung. Yi Fang would supply Taipei City and County. Hua Paper would supply Keelung. Taiwan Chih Lu, Formosa Plastic and Taiwan Paper would supply the seventh region (the Kaohsiung metropolis).
In addition, in order to meet the official requirement that a bidding must be participated by three or more bidders, it was agreed that Yuan Fu, Yi Hsin, Hsing Mao, Yuan Yung Hsing and Yuan T'ai Chemical participated in the bidding in various regions. The bidders also undertook the following actions to avoid cross-area competition: submission of high bidding prices, deliberate voiding of bids, deliberate absence from the bid opening, refusal to reduce bidding prices (even if present at the bid opening), and taking turns to obtain bids with the same price (for the seventh region).
In order to maintain their market division agreement, each of the collaborating companies regularly received compensation. For example, when either Ho Chi Pen Yuan or Hsing Mao was awarded the bid for the seventh region, the products would be supplied jointly by Hsing Mao, Yi Hsin, Ho Chi Pen Yuan and T'ai Ho. Such agreement of bidding and supply had been maintained since 1993. The product suppliers were only responsible for transportation requests; the bid winners were responsible for the transportation and the expenses The product suppliers in effect enjoyed transaction profits without actually engaged in it.
Furthermore, all transportation services were provided by the same company for both bid winners and suppliers in the seventh region, so as to place the distribution in proper control. Where the supply to the TPWC and Taipei Water Department was concerned, the respondents' meeting of minds on restriction of trading territory, cross-region competition, and concerted bidding had impeded the competition in the liquid chlorine market. The respondents' actions were sufficient to affect the competition purpose called for by open bidding and constitute concerted acts, prohibited under Article 14 of the Law.
Summarized by Lin, Hsiao Hung
Supervised by Li, Yen Hsi