An ex officio investigation of any manipulation in the price increases of vegetables and fruits during the second half of 2005

Chinese Taipei

Case:

Key Words:

Vegetable and fruit, green onion, manipulation in price increase

Reference:

Fair Trade Commission Decision of April 20, 2006 (the 754th Commissioners’ Meeting)

Industry:

Vegetables (0114)

Relevant Laws:

Article 14 of the Fair Trade Law

Summary:

1. This case originated from a media’s report on July 7, 2005 indicating that the Directorate-General of Budget, Accounting and Statistics has announced the consumer price index in June has risen by 2.39%, as compared with that of last year. However, the price for food has risen 6.03% for the past six months. Premier Hsieh indicated that the soaring prices of vegetables and fruits were mainly caused by the flood disaster, and instructed the government to carry out thorough investigation of whether there was any price manipulation or hoarding. In addition, the export of mango to Japan may have caused the price of mango to rise recently and further investigation is needed to find out whether the farmers have intentionally raised the price of mango, as they saw the possibility of selling mango to the Mainland China. Upon approval from the superior authority, the Fair Trade Commission (FTC) initiated an ex officio investigation on July 8, 2005 and handled the issues as a case of top priority. Moreover, the FTC service center also received a call from the public on July 4, 2005, complaining that the price of green onion from Yilan has increased by five to six times even though Yilan area was not hit by the torrential rain, a doubt of price manipulation. The Vice Chairperson instructed, “In coordinate with the Premier Hsieh’s comment reported on media yesterday, this complaint shall be included in the ex officio investigation. The investigation extends to all vegetables and fruits that may have incidents of law violation.” The application to initiate investigation was approved with the remark of “handled according to the comment of Vice Chairperson Yu”.
2. Upon the investigation, the FTC found:
1. Vegetables: The objective evidence from market revealed that the soaring prices of vegetables during the second half of 2005 were caused by a series of natural disasters, the typhoon and torrential rain, which led to drastic reductions of vegetables supplies. The enterprises made decisions independently according to their own business considerations. It is still no obvious and concrete evidence to show that the enterprises 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, and thereby to restrict each other’s business activities. In addition, there is no obvious and concrete evidence showing that the enterprises have any deceptive or obviously unfair conduct that is able to affect trading order.
2. Green onion: In 2005, a series of natural disasters, the flood in June and the Haitang typhoon in July, have seriously damaged green onions in central and southern Taiwan, causing green onion from Yilan became the major source of supply. The market shortage has driven up the price of green onions. There were many consignees and shippers in the green onion market, and they have determined the price of green onions according to their own commercial judgments. Furthermore, Taipei Agricultural Products Marketing Co. adopted public auction system. The investigation did not find any obvious and concrete evidences of artificial price hikes for green onions by the enterprises. In addition, the Sanhsing Area Farmers Association from Yilan has adopted joint marketing of their green onions long time ago, and thus they probably can control the quantity supplied. However, it is still unable to conclude that they have violated the Fair Trade Law according to the currently available evidences.
3. Fruits: The objective evidences from market revealed that the price hike of fruits during the second half of 2005 was caused by a series of natural disaster, the typhoon and torrential rain, which led to drastic reductions of fruits supplies. The enterprises made decisions independently according to their own business considerations. The super typhoon Nanmadol at the end of 2004 and the typhoon Haitang and Talim in 2005 have blown down a legion of banana trees, causing the harvest and supply to major distribution markets dropped by 20% and 26% respectively as compared with the last year, which led to the price soaring. Although the supply of pineapples did not change much from that of last year, but the abnormal climate in 2005 has caused the prices of domestic fruits to rise; the consumers have substituted pineapples for other fruits and thus causing both demand and price for pineapples to increase. There was a cold current during the fruiting period of mangos in February and March of 2005, as a result, the percentage of fruiting has dropped and the harvest declined sharply. The harvest at Yu-jing Shiang declined around 60 to 70 percent and that of Nan-hua Shiang declined around 70 to 80 percent. In addition, the disastrous torrential rain in June has seriously damaged mangos, and coupling with the increase export demand, the price of mango has increased. It is still no obvious and concrete evidence to show that the enterprises 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, and thereby to restrict each other’s business activities. In addition, there is no obvious and concrete evidence that the enterprises have any deceptive or obviously unfair conduct that is able to affect trading order.
3. Finding: On April 20, 2006, the FTC 754th Commissioners’ Meeting concluded that according to the continuous investigations from the second half of 2005 until now, there is no concrete evidence showing the soaring prices of vegetables and fruits were due to joint price manipulations. However, in order to prevent the relevant enterprises from violating laws or affecting trading order later, the FTC sent letters to Taipei City Vegetables Association, Taipei City Fresh Fruits Association and Taipei Agricultural Products Marketing Co., asking them to notify their respective members that price fixing through mutual consent, market monopolization or other abuses of market position that violated the Fair Trade Law are prohibited.

Summarized by: Shue, Ching-Shung;
Supervised by: Lu, Li-Na