Petro-Gas Supply Division of Veterans Affairs Commission was complained for its monopoly in household liquefied petro-gas business

Chinese Taipei

Case:

Petro-Gas Supply Division of Veterans Affairs Commission was complained for its monopoly in household liquefied petro-gas business

Key Words:

market entry barrier, monopoly, sole distribution

Reference:

Fair Trade Commission Decision of June 23, 1993 (the 90th Commission Meeting); Disposition of (82) Kung Er Tse 52002

Industry:

Gas Fuel Supply Business (4200)

Relevant Law:

Article 10 of the Fair Trade Law

Summary:

1. Liquefied Petro-gas ("LPG") is a household necessity. China Petroleum Corporation (CPC) has been the sole supplier of LPG since 1960 and then granted to the distributorship to Yu Tai Company and Juei Hua Company, two KMT (Kuo Min Tang--the ruling party in Chinese Taipei) owned enterprises. In 1978, for providing more employment opportunities for veterans, the Veterans Affairs Commission (VAC) established the Liquefied Petro-Gas Supply Division (LPGSD) for sole distribution of Liquefied Petro-Gas.

2. On February 8, 1993 the Fair Trade Commission announced the monopoly status of CPC and LPGSD. In the list of monopoly enterprises published on February 8, 1993 by the Fair Trade Commission (FTC), CPC and LPGSD are categorized as the monopoly enterprises respectively in the petro-gas market and the household containerized liquefied gas distribution market. Since acquisition of the monopoly status in the two specific markets for these two enterprises resulted from the government regulations rather than from free competition. The utilization of such a superior market position, especially the part related to the establishment of economic system, must be arranged to avoid measures which might impede other enterprises from gaining the access to the down-stream industries so as to prevent the statutory monopoly interests from being unlawfully transferred, or from manipulatively depriving other persons of their opportunity to develop their respective business activities through competition.

3. After becoming the sole distributor, the LPGSD has taken improper measures to refrain down-stream enterprises from entering into the market by freezing a number of refilling yard, transportation companies and the issuance of distributor license. This is inconsistent with the intent of Article 10(1) of the Fair Trade Law. Therefore, CPC should not sign a further sole distributor agreement with Liquefied Petro-Gas Supply Division of Veterans Affairs Commission; otherwise, it will give rise to a dispute on the susceptible violation of Article 10(1) of the Fair Trade Law. Nevertheless, CPC could still sign a non-exclusive distributor agreement with the LPGSD.

4. As the exclusive distributor agreement between CPC and LPGSD will expire at the end of February of 1993, resolutions have been reached at the Commission Meeting of FTC as follows:

(1) For the part of CPC: CPC's original decision to appoint LPGSD as the exclusive distributor was based on an administrative order issued by the Cabinet to satisfy the old policy. In view of the contractual obligation of CPC under the said sole distributor agreement and the fact that the LPG is one of the household necessities to millions of people, CPC must continue its supply of LPG to LPGSD before the expiration of the said agreement (February 28, 1993). However, as both CPC and LPGSD have been identified as monopoly enterprises in a public notice of FTC, therefore, the position of these two enterprises under the Fair Trade Law after expiration of the said agreement will be completely different from that of the year 1978. In other words, after expiry of the exclusive distributor agreement between CPC and LPGSD, CPC shall not renew such exclusive distributor agreement with LPGSD (but they may sign a non-exclusive distributor agreement), otherwise, it will violate Article 10 of the Fair Trade Law. Consequently, considering that the market needs some time to adopt the future changes in the structure of LPG distribution system, CPC and the Ministry of Economic Affairs (MOEA) shall, within one half or a whole year, complete the development and promulgation of the distributor administration regulations which contain feasible and reasonable distributor qualification requirements and are in conformity with the Fair Trade Law so as to fully liberalize LPG distribution market.

(2) For the part of LPGSD: Though there are a number of administrative and control measures which have been drawn up by LPGSD and approved by VAC for enforcement based on the safety consideration in respect of the use of LPG and proper management of exclusive distribution operations, the binding force of such restrictive rules and measures will become limited. Nevertheless, FTC still deems it necessary to urge LPGSD to make prompt correction of its improper conduct so as to make its business operation conforming to the requirements set out in the Fair Trade Law.

　

Summarized by Huang, Chung-Chieh
Supervised by Yu, Su Su

＄: For information of translation, click here

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