Measures in anticipation of complete liberalization of the petroleum products market
Case:
Measures in anticipation of complete liberalization of the petroleum products market
Key Words:
complete liberalization of petroleum products, petroleum product providers, explanation of regulations, termination of contract
Reference:
Fair Trade Commission Decision of December 27, 2001 (the 529th Commissioners' Meeting)
Industry:
Petroleum Refineries (1910).
< b>Relevant Law:
Article 19(vi) of the Fair Trade Law
Summary:
1. At the 451st Commissioners' Meeting, the commissioners adopted the Explanation of Fair Trade Law Regulations Governing the Activities of Petroleum Product Providers Prior to the Complete Liberalization of the Petroleum Product Market. At the 529th Commissioners' Meeting on 27 December 2001, the commissioners adopted a resolution regarding the part of this document that deals with attempts to restrict the termination of contracts. The resolution adopted at the 529th Commissioners' Meeting requires new and old petroleum product suppliers to cooperate with the government's plans for complete liberalization of the petroleum product market, and to avoid taking illegal actions aimed at preventing gasoline stations from terminating contracts. The Fair Trade Commission (FTC) intends to closely monitor the on going status of competition in the petroleum product market and carry out investigations aimed at verifying whether there are barriers to market access, in order to maintain the competition mechanism in the petroleum product market.2. The FTC held a public hearing on 20 December 2001 for discussion of "Issues Related to the Right of Gasoline Stations to Terminate Contracts and the Applicability of the Fair Trade Law Since Promulgation and Entry into Force of the Petroleum Management Law." The hearing reached a conclusion that the date announced by the Energy Commission of the Ministry of Economic Affairs as the first day of opening of the petroleum product market to imports would be the starting point of complete liberalization of the petroleum product market. With regard to the question of what constitutes a reasonable schedule for the entry of new petroleum product suppliers into the market, the FTC (after meetings with the Environmental Protection Administration, the MOEA Energy Commissio n, the MOEA Department of Commerce, and other agencies) determined that 55 working days would constitute a reasonable schedule. At the 529th Commissioners' Meeting, held on 27 December 2001, a resolution was adopted stating that if the competent government agencies had not yet finished developing the guidelines and procedures necessary for them to carry out related work, making it impossible for any new petroleum product provider to begin providing petroleum products by 1 March 2002, the said petroleum product providers should consider allowing an extension of the final deadline for gasoline stations to exercise the right to terminate contracts with their suppliers. Current contracts allow gasoline stations a two-month period within which they are allowed to terminate contracts with their suppliers, and the resolution adopted by the FTC commissioners encourages extension of this time period so as to meet the need of gasoline stations to freely choose between different suppliers. In addition, during th e time prior to the market entry of new petroleum product suppliers, existing petroleum product suppliers are required to provide transitional contracts (with the said period of transition beginning on the cutoff date for the aforementioned two-month period for contract termination, and continuing until the first day on which a new petroleum product supplier is able to begin supplying petroleum products), in order to provide gasoline stations (that are trying to decide whether to use a new petroleum product supplier) with an opportunity to compare and choose. The purpose of requiring existing petroleum product suppliers to provide transitional contracts is to prevent those petroleum product suppliers from improperly cutting off the supply of petroleum products. With respect to coordinated measures to be taken during the transitional period, existing petroleum product suppliers must be aware that they are not allowed to enter into agreements or reach any other form of understanding among themselves, as such b ehavior would violate Free Trade Law regulations that prohibit concerned actions. At the same time, new petroleum product suppliers are required to include provisions in their contracts with gasoline stations that give the latter a two-month period to terminate said contracts before they come to term without forfeiting the remaining portion of their franchise fee. The intent of this requirement is to ensure that new and existing petroleum product providers are both subject to the same treatment.3. The MOEA Energy Commission has already announced that the market for petroleum products would be completely opened to imports from 26 December 2001. At this time of transition to a complete liberalized petroleum products market, the FTC intends to pay closely monitor the changes in the petroleum products market and related trading behavior, if any party, whether it be a new or existing petroleum product supplier, acts to restrict competition or obstruct fair competition, the FTC will initiate an in vestigation and sanction the behavior that violates the Fair Trade Law based upon concrete evidence.Summarized by Huang, Po-Chia; Supervised by Lin, Gin-Lan