Interpretation of whether gas coupon books used at many gas stations violate the Fair Trade Law
Case:
Interpretation of whether gas coupon books used at many gas stations violate the Fair Trade Law
Key Words:
gas coupon books, gas coupons, pre-paid cards, pre-paid transactions
Reference:
Fair Trade Commission Decision of August 31, 2000 (the 460th commissioners' Meeting)
Industry:
Gas Station Industry (5441)
Relevant Laws:
Summary:
1. Gas coupon books are vouchers for gas that oil companies issue as convenience to their bulk customers to simplify the process fuel purchases. This is a special type of retail oil product. As the usual practice has shown, when bulk customers buy gas coupon books issued by Chinese Petroleum Corp., they first pre-purchase a fixed amount of gasoline and diesel and then obtain petroleum products from designated gas stations on separate occasions with a gas coupon book in which the amount purchased has been recorded. At this point, an exclusive transaction relationship involving petroleum products exists between Chinese Petroleum Corp. and the bulk customer who purchased the gas coupon book. The franchise gas stations that actually deliver the product are not the sellers since they are merely entrusted by Chinese Petroleum Corp. with the task of delivering petroleum products, on behalf of Chinese Petroleum Corp., to customers with gas coupon books. As such, they are assistants to Chinese Petroleum Corp. in the performance of its sales contracts, rather than the sellers of the petroleum products. Consequently, Chinese Petroleum Corp. and the franchise gas stations that it has entrusted with the task of delivering its products do not jointly set prices in violation of the Fair Trade Law's (the "Law") provisions regarding concerted acts. Furthermore, given that there is no transactional relation between the gas stations delivering the product and customers with gas coupon books, restraint of resale cannot occur at all. Nor would private gas stations violate the provisions against concerted action or restraint of resale prices should they issue gas coupon books in the same manner. 2. Should an oil company issue gas coupon books or engage in other types of pre-paid transactions of petroleum products and also entrust other gas stations to sell gas coupon books, gas coupons, pre-paid cards, or other vouchers for product delivery, the relationship between the issuing company and the entrusted gas stations would constitute a vertical relationship between upstream and downstream businesses with respect to the vouchers unless the oil company entrusted gas stations only engage in product delivery. If the company issuing the vouchers then restrains the price at which the entrusted gas station sells the vouchers, it may be restraining prices in violation of Article 18 of the Law. 3. If an oil company issues gas coupon books and then commits any of the following acts, it will be in violation of Article 18 of the Law: (1) An oil company with a monopoly position on the market uses gas coupon books or other pre-paid vouchers to [1] abuse its monopoly position by directly or indirectly restraining other enterprises from competing, [2] improperly decides to change or maintain gas voucher prices or profit-sharing arrangements, or [3] otherwise abuses its market position. (2) An oil company with influence on the market that abuse its market power [1] by using pre-paid vouchers that is capable of restraining competition or obstructing fair competition, including gas coupon books, to improperly restrain the business activities of a trading counterpart, or [2] commits other acts of unfair competition. (3) Oil companies that compete horizontally and that use prepaid vouchers including gas coupon books [1] to exchange significant and sensitive competition data, [2] to establish understandings or agreements and thereby set prices for goods or services, or [3] to jointly restrain their business activities and thereby engage in concerted action. (4) Oil companies that compete horizontally and jointly issue pre-paid gas vouchers, including gas coupon books, that thereby render them capable of affecting the petroleum industry's market. .Summarized by Li-dar Wang; Supervised by Tat-cheng Ma