Taipei Hsien Jewelry Commercial Association

Case:

Key Words:

ornamental gold market, association, concerted action

Reference:

Fair Trade Commission Decision of April 12, 2007 (the 804th Commissioners' Meeting); Kung Ch'u Tzu No. 096082

Industry:

Jewelry and Related Articles Manufacturing (3391)

Relevant Laws:

Article 7(1),(3) and 14(1) of the Fair Trade Law

Summary:

1. This case originated from complaints of the jewelry enterprises that: Taipei Hsien Jewelry Commercial Association informed its members of daily buying and selling prices of ornamental gold, white gold and gold by the short message service (sms, hereafter) at about 10:40 each morning. In the event that any particular member does not comply with the suggested selling prices of the Association, the Association will entail the member to conform to the prices by telephone calls, sending staffs to persuade and exhort the member and issuing a letter for warning. Such an act restrained price competition amongst members and the Association violated Article 14 of the Fair Trade Law.
2. Findings of FTC after investigation: Taipei Hsien Jewelry Commercial Association has approximately 500 members, which are all in jewelry business in Taipei County. The said Association informed its members of "the reference list prices" for buying and selling ornamental gold, "the whole price of gold" and "the list price of white gold" by sms each day. The said whole price of gold is the cost price for the member of the Association (i.e., producer price), which is the lowest price of the offered prices of gold provided daily by the Central Trust of China, importers or service wholesalers, and the members can regard the prices as reference when they procure gold from the upstream gold suppliers. The Association indicated that the reference list prices of ornamental gold stipulated by the Association were only for the members' reference prior to pricing their products and were not binding; it however admitted that in the case that a member persistently sells ornamental gold at prices lower than or approximate to international quotations and affects the rights and benefits of the same business in the vicinity, the Association will request the local directors and supervisors to go to the jewelry store to understand the reasons for lower prices. As a matter of fact, a jewelry enterprise also had ever priced ornamental gold lower than "the list price of gold," the Association, by telephone calls or sending people for visits, had persuaded and exhorted the jewelry enterprise that the store shall conduct its business in harmony with the same business, and selling ornamental gold at prices lower than "the list price of gold" was prohibited. The Association additionally issued letters to all members on August 29, 2005, to persuade and exhort them that selling ornamental gold at prices lower than international quotations was prohibited.
3. Grounds for disposition:
1. Findings of FTC after investigation showed that Taipei Hsien Jewelry Commercial Association indeed persuaded and exhorted members, and restrained their prices of ornamental gold, by the means of telephone calls from the director-general or director, or sending staff to pay personal visits. The Association justified its act on restraining the aforementioned conducts of members that in the event that a member persistently sells ornamental gold at the prices lower than or approximate to international quotations, these evidences might reflect something wrong with the material sources of ornamental gold and purity of gold, or that the member may include processing charges to cover price difference and hence deceive consumers.
2. The decision of the FTC's commissioners' meeting showed that the acts of restraining business activities conducted in terms of the charter, a resolution of a general meeting of members or a board meeting of directors or supervisors of the Association, or any "other means" fell under the term, concerted action, set forth under the Fair Trade Law and the text concerning such an action is provided under Article 7(4) of the Fair Trade Law. As international gold price fluctuates every day and the direct cost of selling ornamental gold is obviously different due to the differences of the material sources of ornamental gold and the time of buying. In the same way, the operation cost of each jewelry enterprise is different, so are the market environment and competition conditions confronted by it and the adopted commercial strategies. Therefore, the price competition of ornamental gold will not impede with the operation of the market function, and it will benefit consumers. The aforementioned act of Taipei Hsien Jewelry Commercial Association would cause jewelry enterprises to be inclined to selling ornamental gold at prices not lower than international quotations, and then would cause the lower limit of price and harm price competition. It might further affect the market function for trading ornamental gold in the related markets. Thus, it did not conform to the provision that prohibits concerted action as provided by Article 14(1) of the Fair Trade Law. In conclusion, the FTC ordered the Association to cease the unlawful acts and imposed an administrative fine of NT$ 500,000 in terms of the fore part of Article 41 of the Fair Trade Law.

Appendix: None