The Eggs Business Association of Taoyuan County adopted a resolution at the Joint Meeting of Board of Directors and Supervisors and requested transportation marketers to sell chicken-eggs to its members at a price lower than the announced farm price, a violation of Paragraph 1, Article 14 of the Fair Trade Law.

Chinese Taipei

Case:

The Eggs Business Association of Taoyuan County adopted a resolution at the Joint Meeting of Board of Directors and Supervisors and requested transportation marketers to sell chicken-eggs to its members at a price lower than the announced farm price, a violation of Paragraph 1, Article 14 of the Fair Trade Law.

Key Words:

Eggs Business Association of Taoyuan County, C hicken-eggs, P rice

Reference:

Fair Trade Commission Decision of May 26, 2005 (the 707th Commissioners' Meeting), Disposition Kung Ch’u Tzu No. 094057

Industry:

?Business Associations (9421)

Relevant Laws:

?Paragraph 1, Article 14 of the Fair Trade Law

Summary:

1. The Fair Trade Commission received a letter from Poultry Association of Republic of China that indicated the Eggs Business Association of Taoyuan County has convened a coordination meeting on June 30, 2004 and after that, the Ninth Board of Directors and Supervisors of the said Eggs Business Association he ld the seventh Joint Meeting of Board of Directors and Supervisors and the seventh provisional Joint Meeting of Board of Directors and Supervisors on August 14 and August 20 of the same year and reached a resolution of requesting eggs marketers (in Chinese Taipei, the eggs marketer provides means of transportation to deliver eggs from eggs farm to eggs distributors, the marketer buys eggs from eggs farm and sell it to egg distributors) to sell eggs to its members at a price calculated as “farm price less NT$2” per Taiwanese kilo (catty) for one of the deliveries every week. Then, the marketers were requested to claim the loss of discounts from chicken farmers. The conduct of the aforementioned resolution that compels chicken farmers to supply eggs below the farm price of chicken-egg without their consent has violated the regulations of the Fair Trade Law.
2. The Fair Trade Commission’s investigation found that Lung Tian Store sold eggs at a price between NT$0.50 to NT$1 lower than the farm prices during March and August of 2004, causing a surprise to the market. As a result, the Eggs Business Association of Taoyuan County convened the ninth term seventh Joint Meeting of Board of Directors and Supervisors on August 14, 2004. The advisor of the said Association presented a proposal of requesting eggs marketers to sell eggs to its members at a price calculated as “farm price less NT$2” per Taiwanese kilo (catty) for one of the deliveries every week. However, it was resolved at the same time that a provisional Board of Directors and Supervisors Meeting must be he ld before the said proposal is put into practice. Then, the Eggs Business Association of Taoyuan County convened the ninth term seventh provisional Joint Meeting of Board of Directors and Supervisors on August 20, 2004 to discuss the conditions and date of putting the said proposal into practice and concluded the resolutions as such “Implementation Conditions -- the percentage of wholesalers in the County that has been affected is used as the basis of implementation and a letter is sent to the marketers. Implementation date – when the situation meets the aforementioned implementation conditions, the Association will convene provisional Board of Directors and Supervisors Meeting to decide the date of implementation.” The incident of Lung Tian Store selling eggs at a price below the farm price for a total of more than 500 cartons per day, accounting for more than ten percent of Taoyuan County’s total sales (approximately 4,000 cartons) is used as the terms to implement the aforementioned resolution. The Association, by means of the aforementioned resolution, attempted to influence the marketers so that they will express the incident to the chicken farmers and hence to reduce the farm price. Thereafter, as the Eggs Business Association of Taoyuan County was unable to completely compile the statistic of percentage of the County’s wholesalers being affected and at the same time the price of eggs dropped to NT$12 per catty on August 18, 2004 as a result of oversupply, hence, the Eggs Business Association of Taoyuan County did not proceed to convene the relevant meeting to decide the date of implementation.??????????????????
3. Grounds for disposition and decisions:
1. The trading in eggs market at present time: Presently, the “sole marketer system” is the major means of selling eggs in Chinese Taipei. That is, the egg marketers buy all eggs, regardless of the quality and size of chicken-eggs, from egg farmers at a price of NT$2 below the Taipei marketer’s price as published by China Times or United Daily News. The “Taipei wholesaler price” and “Taipei marketer price” of eggs published in the China Times and United Daily News are “market quotations for previous day” and affected by the market demand and supply, they are important references and basis of chicken-eggs trading prices voluntarily recognized by all egg marketers and egg farmers in Chinese Taipei. It is found that in order to handle the incident of “market surprise caused by the eggs’ selling prices of Lung Tian Store”, the Eggs Business Association of Taoyuan County thereof convened the ninth term seventh Joint Meeting of Board of Directors and Supervisors on August 14, 2004 to resolve and pass a provisional agenda that requesting eggs marketers to sell eggs to its members at a price calculated as “farm price less NT$2” per Taiwanese kilo (catty) for one of the deliveries every week. Again, the Association convened the ninth term seventh provisional Joint Meeting of Board of Directors and Supervisors on August 20, 2004 to conclude resolutions of “Implementation Conditions -- the percentage of wholesalers in the County that has been affected is used as the basis of implementation and a letter is sent to the marketers. Implementation date – when the situation meets the aforementioned implementation conditions, the Association will convene provisional Board of Directors and Supervisors Meeting to decide the date of implementation.” However, in accordance with the principle that the previous day published market price is referred to for determining the market price of chicken-eggs, the buyers and sellers carry out trading freely due to that no enterprise is allowed to by means of contrived mutual understanding and jointly determine the market price of chicken-eggs. In addition , the trade association is not allowed to by means of its charter, a resolution of a general meeting of members or a board meeting of directors or supervisors, or any other means, to restrict the trading prices of its members and hence to restrain free market competition, furthermore, the trade association also may not shirk its responsibility with an argument that it is rational for the trade association to adjust trading price as there is a price war among enterprises.????? ???????
2. The conduct of enterprises is only deemed as a concerted action if such conduct is to the extent of sufficient to affect market functioning. The so-called “sufficient to affect market functioning” refers to the restrictive market competition acts of arise from the mutual understanding of enterprises and reach an extent that is a risk of “sufficient” to affect the supply and demand functions, and not restricted to the actual influence on the market functioning. Trade association is considered as an enterprise in the Fair Trade Law, and its conduct of reciprocally restricting activities of enterprises by means of a resolution of board meeting of directors or supervisors therefore will exert complete sanction or influence on its members’ market business behaviors, and consequently influence the order of market competition . Furthermore, due to the unique characteristics of eggs’ production and marketing, the liberalization and transparency of market trading is even more important. It is found that the Eggs Business Association of Taoyuan County has 74 members in Taoyuan area; the marketers make three deliveries to the eggs merchants (wholesalers) every week. The Joint Meeting of Board of Directors and Supervisors jointly passed a resolution for the Eggs Business Association of Taoyuan County to request eggs marketers to sell eggs to its members at a price calculated as “farm price less NT$2” per Taiwanese kilo (catty) for one of the deliveries every week. The aforementioned resolution inevitably will influence the chicken-egg’s trading price between egg marketers and egg merchants in Taoyuan area, restrict the market’s free competition, give rise to trading price controversy and affect market functioning. Even though the aforementioned resolution is not put into practice, but in accordance with the Fair Trade Law, the term concerted action is stipulated as the conduct of any enterprise, by means of contract, agreement, or any other form of mutual understanding, with any other competing enterprise, to jointly determine the price of goods or services, or to limit the terms of quantity, technology, products, facilities, trading counterparts, or trading territory with respect to such goods, services and others and thereby to restrict each other’s business activities. Also, such concerted action would affect the market function of production, trade in goods, or supply and demand of services. The existence of concerted action is not affected by whether the content of the concerted action is actually put into practice later.
3. To sum up, the acts of the Eggs Business Association of Taoyuan County by means of implementing the resolution reached in the Ninth Board of Directors and Supervisors’ seventh Joint Meeting of Board of Directors and Supervisors and seventh provisional Joint Meeting of Board of Directors and Supervisors that requested eggs marketers to sell eggs to its members at a price calculated as “farm price less NT$2” per Taiwanese kilo (catty) for one of the deliveries every week which then restrict ?market competition and would affect the chicken-egg’s trading price between egg marketers and egg merchants has met the definition of concerted action as defined in Article 7 of the Fair Trade Law and therefore is in violation of the provision of Paragraph 1, Article 14 of the Fair Trade Law. After considering 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; operating condition, market position, past violations, attitudes toward the violation and other factors, and, moreover, given that the Association does not have any intention to convene again provisional meeting of Board of Directors and Supervisors to decide the date of implementation and also does not put the consent of concerted action into practice, therefore, the Commission orders the Association to cease the unlawful acts immediately and a fine of NT$200 thousands is imposed according to the anterior paragraph of Article 41 of the Fair Trade Law.

Summarized by Tai, Mei-Chin;
Supervised by Lu, Li-Na

Appendix:

The Eggs Business Association of Taoyuan County’s Uniform Invoice Number: 02613194