The ex officio investigations of Taichung County Lunchbox Association’s collection of security deposits from its members to prevent its members from price war, and violated the Fair Trade Law

Chinese Taipei

Case:

Key Words:

School catering, check as security deposit, permanent suspension of rights

Reference:

Fair Trade Commission Decision of June 8, 2006 (the 761st Commissioners’ Meeting), Disposition Kung Chu Tzu No. 095085

Industry:

Bakery Product Manufacturing (0842)

Relevant Laws:

Article 19 , Subparagraph 4 of the Fair Trade Law

Summary:

1. This case originated from a letter written by Taichung County Government and transferred from the Ministry of Interior. Taichung County Government requested for an explanation of whether the act of Taichung County Lunchbox Association to collect security deposits from its members in order to prevent them from price war was unlawful. The Fair Trade Commission (FTC) was requested to provide its opinion on such conduct. In addition to the provision of opinion, the FTC also initiated an ex officio investigation to examine the lunchbox market of Taichung County.
2. Upon the investigation, the FTC found that the members of Taichung County Lunchbox Association have reached agreement and resolution in the general meeting that the price of a four dishes and one soup school lunchbox should not less than NT$ 40. Furthermore, the members were reminded not to engage in cut-throat competition. It is found that the price of lunchbox for some schools in Taichung County had dropped to NT$35 from NT$ 40 in the middle of 2001. The member enterprises believed that such cut would reduce profit and consequently the members of Taichung County Lunchbox Association reached a resolution in the general meeting in August 2001 and all members were notified that they should maintain the price of lunchbox at NT$ 40. In order to prevent the members from engaging in price war, a resolution of collecting NT$ 200,000 check from each member as a security deposit was reached. As a punishment, the check of a member that violated the regulation will be cashed. In August 2005, Chun Kuo Chan Catering Company and Kuo Miao Hsiang Food Co., Ltd. participated in the lunchbox bidding of Ta Ming Elementary School at Ta Ya Town, priced at the lower price of NT$ 35 (separate the lunchbox into meal and fruit and the bids were for meal only). The Association’s Chairman had made several calls prior to the commencement of bidding to stop the said members from participating in the bidding. After bidding, the checks of the said members were cashed by the Association and their security deposits were confiscated (the check of Kuo Miao Hsiang Food Co., Ltd. was overdue and cannot be cashed). Even more, the Association has reached a resolution to suspend the rights of Chun Kuo Chan Catering Company permanently. It is evidence that the said Association indeed has carried out the aforementioned punishment of confiscating the member’s security deposit when it violated the regulation prohibiting price war.
3. Grounds for disposition:
1. The Taichung County Lunchbox Association has increased and maintained the price of a lunchbox at NT$ 40 by means of the resolution made in the general meeting. The members were also requested to deposit NT$ 200,000 checks as security. Such conduct has violated the provision of Article 19, Subparagraph 4 of the Fair Trade Law.
2. Taking into consideration the motivation, purpose and expected improper benefit of the unlawful acts of the said Association; the degree and duration of the act’s harm to market order; benefits derived on account of the unlawful act; scale, operating condition and market position of the enterprise; past violations, remorse shown for the act and attitude of cooperation in the investigation, therefore, the said Association is ordered to cease the unlawful acts and a fine of NT$ 640,000 is imposed according to the anterior paragraph of Article 41 of the Fair Trade Law.

Summarized by: Huang, Chung-Chieh;
Supervised by: Wu, Pi-Ju

Appendix: Nil