Chinese Petroleum Corp. and Formosa Petrochemical Corp. violated the Fair Trade Law by jointly determining the prices of petroleum products, an administrative fine of NT$6,500,000 was separately imposed on each enterprise, an appeal is filed by the respondents on the ground that the Fair Trade Commission’s original disposition was inconvincible. The Executive Yuan (Cabinet) rendered a decision that rescinds the administrative fine in the original disposition and directs the Fair Trade Commission to replace the original disposition with another legally appropriate punishment

Chinese Taipei

Case:

Chinese Petroleum Corp. and Formosa Petrochemical Corp. violated the Fair Trade Law by jointly determining the prices of petroleum products, an administrative fine of NT$6,500,000 was separately imposed on each enterprise, an appeal is filed by the respondents on the ground that the Fair Trade Commission’s original disposition was inconvincible. T he Executive Yuan (Cabinet) rendered a decision that rescinds the administrative fine in the original disposition and directs the Fair Trade Commission to replace the original disposition with another legally appropriate punishment

Key Words:

Concerted A ction, Imposition of A dministrative F ine

Reference:

Fair Trade Commission Decision of July 21, 2005 (the 715th Commissioners' Meeting), Disposition Kung Ch’u Tzu No. 094079 of July 25, 2005

Industry:

Other Petroleum and Coal Products Manufacturing (1990)

Relevant Laws:

Article 7 and Article 14 of the Fair Trade Law

Summary:

1. This case originates from the Fair Trade Commission’s decision of October 14, 2004 made during the 675th Commissioners’ Meeting, concluded that Chinese Petroleum Corp. (hereinafter referred to as “CPC’) and Formosa Petrochemical Corp. (hereinafter referred to as “FPCC”) have violated the prohibitive provision of Paragraph 1, Article 14 of the Fair Trade Law that no enterprise shall have any concerted action. An administrative fine of NT$ 6,500,000 was imposed separately on both enterprises in a disposition Kung Ch’u Tzu No. 093102 issued on October 21, 2004. However, the respondents CPC and FPCC are not convinced with the original disposition and thus have filed appeals with the Executive Yuan (Cabinet) according to administrative relief procedures. On May 27, 2005, the appeal decision number Yuan-Tai-Su-Tzu-0940085752 and Yuan-Tai-Su-Tzu-0940085957 rendered by the Executive Yuan (Cabinet) have separately made conclusions that “rescind administrative fine in the original disposition and the original competent authority of the punishment shall replace the punishment with another legally appropriate punishments within two months. The rest of the appeals are dismissed.”
2. Co ncerted actions of enterprises are considered serious offense in the Fair Trade Law, in particular that the impacts of oligopolies’ concerted actions on market functions are even regarded as the most serious type of offenses . Therefore, a full effort must be devoted to carry out investigations such concerted actions and hence to effectively stop then . This kind of investigation is also consistent with the international trend of Organization for Economic Cooperation and Development’s (OECD) advocacy in combating hard-core cartels in recent years. Also , the anterior paragraph of the Article 41 of the Fair Trade Law stipulates that “t he Fair Trade Commission may order any enterprise that violates any of the provisions of this Law to cease therefrom, rectify its conduct or take necessary corrective action within the time prescribed in the order; in addition, it may assess upon such enterprise an administrative penalty of not less than fifty thousand nor more than twenty-five million New Taiwanese Dollars….”. Therefore, for any enterprise that has first time violated the prohibitive provision of Paragraph 1, Article 14 of the Fair Trade Law that no enterprise shall have any concerted action, the Fair Trade Commission, in accordance with the anterior paragraph of the Article 41 of the Fair Trade Law, may order any enterprise that violates any of the provisions of this Law to cease therefrom, rectify its conduct or take necessary corrective action within the time prescribed in the order; in addition, it may assess upon such enterprise an administrative penalty of not less than fifty thousand nor more than twenty-five million New Taiwanese Dollars. Although the range of the aforementioned fine punishment is as great as a 500 times differences between the minimum and the maximum, however, it remains within the range of discretion authorized by the law . In another word, the Fair Trade Commission has discretion to determine the amount of fine to be imposed on a violator.???
3. With regard to the imposition of fine for any violations of the Fair Trade Law, Article 36 of the Enforcement Rules to the Fair Trade Law has clearly stipulated that “w hen assessing fines in accordance with the Law, all circumstances shall be taken into consideration, and the following items shall be noted: (1) motivation, purpose, and expected improper benefit of the acts; (2) the degree of the act’s harm to market order; (3) the duration of the act’s harm to market order; (4) benefits derived on account of the unlawful act; (5) scale, operating condition, and market position of the enterprise; (6) whether or not the type of unlawful act involved in the violation has been the subject of correction or warning by the Central Competent Authority; (7) types of, number of, and intervening time between past violations, and the punishment for such violations; and (8) remorse shown for the act and attitude of cooperation in the investigation.” In order to impose fair and appropriate punishment, the Fair Trade Commission, in accordance with the provision of Article 36 of the Enforcement Rules to the Fair Trade Law, established “Reference Table of Fine Imposition” which serves as references of fine punishments and applied to cases that are sanctioned and fined in Article 41 and Article 42 of the Fair Trade Law. The said reference table has divided violations into several different classes with points allocated for each class according to the items to be noted as stipulated in Article 36 of the Enforcement Rules to the Fair Trade Law, so that appropriate and reasonable selection or punishment can be made according to the actual circumstances of each individual case. The amount of the fine to be imposed on the respondents in this case are calculated separately in such manner that for each respondent, according to the items taken into consideration, different point is assigned for different class, then the points for all items are summed up and check up the table for determining the fine that must be imposed.
4. Both Chinese Petroleum Corp. and Formosa Petrochemical Corp. in this case have violated the prohibitive provision of Paragraph 1, Article 14 of the Fair Trade Law that no enterprise shall have any concerted action and shall be punished according to the anterior paragraph of Article 41 of the Fair Trade Law. Taken into consideration the motivation, purpose, and expected improper benefit of the acts; the degree of the act’s harm to market order; the duration of the act’s harm to market order; benefits derived on account of the unlawful act; scale, operating condition, sales volume and market position of the enterprise; whether or not the type of unlawful act involved in the violation has been the subject of correction or warning by the Central Competent Authority; types of, number of, and intervening time between past violations, and the punishment for such violations; remorse shown for the act and attitude of cooperation in the investigation and other factors, an administrative fine of NT$6,500,000 was imposed separately on the two respondents.????

Summarized by Yang, Chia-Hui;
Supervised by Lin, Kin-Lan

Appendix:

Chinese Petroleum Corp.’s Uniform Invoice Number: 03707901
Formosa Petrochemical Corp.’s Uniform Invoice Number: 86522210