The Fair Trade Commission initiated a study and discussion on joint gasoline procurement application by domestic individual gas station operators

Chinese Taipei

Case:

Key Words:

Joint gasoline procurement, guidelines

Reference:

Fair Trade Commission Decision of November 24, 2005 (the 733rd Commissioners’ Meeting); Order Kung-Er-Tzu 0940010699 of December 26, 2005

Industry:

Other Petroleum and Coal Products Manufacturing (1990)

Relevant Laws:

Article 7 、 Article 14 of the Fair Trade Law

Summary:

1. The Fair Trade Commission had separately hold symposiums of “Discussion on the Oil Products’ Distributing Channel Competition after the Market Liberalization” at the northern, central, and southern Chinese Taipei on August 6, 13 and 20, 2004. The attending gas station operators indicated that the rapid growth of franchise operations in gas station market was obviously not beneficial to the individual gas station operators in terms of competition. Moreover, if the individual gas station operators wished to enhance their purchasing power through joint gasoline procurement, such conduct would violate the relevant regulations of concerted action as stipulated in the Fair Trade Law. On this ground, the Fair Trade Commission initiated a study and discussion on the legality of joint gasoline procurement and concerted action of gas station operators.

2. The Fair Trade Commission invited Taiwan Gas Station Operators Association, Taipei City Gas Station Operators Association and Kaohsiung City Gas Station Operators Association to provide their opinions related to the joint gasoline procurement. The Fair Trade Commission has hold symposiums to propagandize the aforementioned issue at northern, central, southern, and eastern Chinese Taipei on June 3, 7, 10, 14, 2005, and concurrently solicited for public opinions on its website. The Fair Trade Commission compiled the relevant opinions and established the Guidelines on Joint Gasoline Procurement Application by Domestic Individual Gas Station Operators

3. The key points of the Guidelines are as follows:
   1. Legal basis: Pursuant to Article 14, Paragraph 1, Subparagraph 7 of the Fair Trade Law, “joint acts for the purpose of improving operational efficiency or strengthening the competitiveness of small-medium enterprises”, enterprises may file an application with the central competent authority for approval of a concerted action in cases where such concerted action is beneficial to the economy as a whole and in the public interest.
   2. Definition of market: The term market as used in these Guidelines refers to two kinds of gas station markets, i.e. the “Oil Product Wholesale Market” and the “Gas Station Retail Market”. The former market is made up of gasoline suppliers and gas station operators all across the nation. To decide the later market, we have to consider the region in which the gas station operator provides goods and services and engages in competition, while at the same time also taking the characteristics of oil products and their substitutability into consideration, that is, the geographical dimension is an important determinant for the market.
   3. Eligible entity: Any individual gas station operator that does not join any franchise system and also meets the present criteria of small and medium-sized enterprises (at present, the small and medium-sized enterprise refers to one that has an annual turnover of less than NT$ 100 million for the preceding year).
   4. Subject matter:
      • The joint acts of purchasing gasoline from an upstream gasoline supplier by individual gas station operators.
   • The gas station operator joins the joint procurement operation is not bound by the joint procurement operation, and can still personally engage in price negotiation with the gasoline supplier. If the gas station operator has engaged in other concerted actions such as retail price agreement, division of sales regions that in essence have hindered market competition, such an operator shall be punished according to the relevant regulation of the Fair Trade Law.
   5. Application requirement: On the basis of the total number of gas stations announced by the Bureau of Energy, Ministry of Economic Affairs for the current month, any joint gasoline procurement in which the total number of individual gas stations is above five percent of the city’s market share must prepare the relevant documents and apply for approval of a concerted action with the Fair Trade Commission beforehand.
   6. The Fair Trade Commission shall be notified by mail beforehand of any joint gasoline procurement of individual gas station operators that does not meet the criteria of these Guidelines, so that an investigation can be carried out to ascertain whether the joint procurement has violated the prohibitive provision of being able to affect the market mechanism of a specially designated area as stipulated in Article 7, Paragraph 2 of the Fair Trade Law. Otherwise, the joint procurement will be investigated and violators punished on a case-by-case basis.

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

Appendix: Nil