Four Penghu County companies, Hua Yong Pre-Mixed Concrete Co., Ltd., Sieh Ying Enterprises Ltd., Hong Cing Enterprises Ltd. and Bing Sen Enterprises Ltd., violates the Fair Trade Law by restricting competition which are sufficiently to adversely affect the trading order in the market for pre-mixed concrete in the Penghu area

Case:

Key Words:

concrete mixing, buy up all available sand and gravel supplies

Reference:

Fair Trade Commission Decision of March 4, 2004 (the 643th Commissioners' Meeting); Disposition Kung Ch'u Tzu No. 093025

Industry:

Concrete Mixing Manufacturing (2232)

Relevant Laws:

Article 14 of the Fair Trade Law

Summary:

This case originated with separate letters to the Fair Trade Commission (FTC) from the Penghu County Government and the Penghu County field office of the Ministry of Justice Investigation Bureau alleging that local companies Hua Yong Pre-Mixed Concrete Co., Ltd. (hereinafter called "Hua Yong"), Sieh Ying Enterprises Ltd. (hereinafter called "Sieh Ying"), Hong Cing Enterprises Ltd. (hereinafter called "Hong Cing") and Bing Sen Enterprises Ltd. (hereinafter called "Bing Sen") were planning to form or had formed a "concrete association" and "joint sales center," in violation of the provisions of Articles 19(i) and 14 of the Fair Trade Law (FTL).
Findings of the FTC after investigation:
1. After forming an association on January 1, 2002, the four companies, Hua Yong, Sieh Ying, Hong Cing and Bing Sen, met during October and November of the same year at the Penghu County Council and at around 9:30 on the evening of January 31, 2003 (Lunar New Year's Eve) at the home of Chairman Weng of Hua Yong and negotiated and reached a consensus on details of the association's sales, sharing of clients, distribution of sales volume, market share and subsidies to each company, and a price hike for pre-mixed concrete in the Penghu area.
2. Following repeated refusals by the original complainant to cooperate with the abovementioned agreement, Hua Yong, Hong Cing, Sieh Ying and Bing Sen sought to eliminate the complainant's competition in the pre-mixed concrete market in the Penghu area by buying up all available sand and gravel supplies and refusing to provide the raw materials to the complainant. The investigation found that the entire cargos of mainland China's sand that were offloaded from two freighters at Penghu on February 23 and 24, 2003 were purchased by Hong Cing and Sieh Ying, then distributed among the other association companies. Furthermore, although the complainant dispatched a truck to the harbor to pick up a load of gravel from a freighter that arrived from Hualien on March 28, 2003, it found that the abovementioned four companies had pressured the gravel supplier with demands that it not supply the complainant with gravel.
Grounds for disposition:
As an offshore area, the pre-mixed concrete market in the Penghu area is relatively closed and local demand is generated mostly by local public construction projects. There are five pre-mixed concrete companies supplying the area, Hua Yong, Hong Cing, Sieh Ying, Bing Sen and Jie Jing, all of which are located on the main island of the Penghu group, in the same geographical market. Average monthly demand for pre-mixed concrete in the Penghu area is about 15,000 to 20,000 cubic meters. The industry relies heavily on freighters to deliver upstream raw materials of sand and gravel from elsewhere. Once a raw materials supplier cuts off supply, downstream pre-mixed concrete operations are seriously affected. The four companies – Hua Yong, Hong Cing, Sieh Ying, Bing Sen – did not compete for trading opportunities on the basis of better prices, quality, service, or greater volume, but instead met on a number of occasions and formed mutual understandings and agreements on the apportioning of sales volume, pricing, subsidies, client sharing, and other practices mutually restraining competition among them. The four further conspired to eliminate competition from an uncooperative competitor by cutting off raw materials supplies. Thus the four did conspire to monopolize the market for pre-mixed concrete in the Penghu area, actions that were sufficient to limit competition in the pre-mixed concrete market in the Penghu area, in violation on the prohibition on concerted action prescribed in Article 14(1) of the FTL. The matter was subsequently disposed of in accordance with the provisions of the forepart of Article 41 of the FTL and the four were ordered to cease the illegal practices. Additionally, after considering the motives and duration of the illegal acts as well as the degree of harm caused to the trading order and other relevant factors, and in accordance with the provisions of the forepart of Article 41 of the FTL, the FTC imposed administrative fines of New Taiwan Dollars (NT$)100,000 each on Hua Yong, Hong Cing and Sieh Ying, and NT$50,000 on Bing Sen as a cooperating enterprise.

Appendix:
Hua Yong Pre-Mixed Concrete Co., Ltd.'s Uniform Invoice Number: 16209671
Hong Cing Enterprises Ltd.'s Uniform Invoice Number: 87738266
Sieh Ying Enterprises Ltd.'s Uniform Invoice Number: 89545716
Bing Sen Enterprises Ltd.'s Uniform Invoice Number: 70519843

Summarized by Yang, Chia-Hsien; Supervised by Tso, Tien-Liang

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