Beansum Agricultural Products Co., Ltd. and Five Enterprises

Case:

Key Words:

red beans, tariff quota, sufficient to affect trading order

Reference:

Fair Trade Commission Decision of November 5, 2008 (the 887th Commissioners' Meeting), Disposition Kung Ch'u Tzu No. 097151

Industry:

Wholesale of Grain and Field Bean (4531)

Relevant Laws:

Article 24 of the Fair Trade Law

Summary:

1. The complainant in this case claimed that for the tender for tariff quota of red beans in Batch 961, the enterprises which won the bid were Beansum Agricultural Products Co., Ltd. (hereinafter referred to as "Beansum Company"), Shinn Cherng Co., Ltd. (hereinafter referred to as "Shinn Cherng Company"), Ju Chieh Ltd. (hereinafter referred to as "Ju Chieh Company"), Lim Kuang Enterprise Co., Ltd. (hereinafter referred to as "Lim Kuang Company"), and E-Green Co., Ltd. (hereinafter referred to as "E-Green Company"). Among these companies, the same family owns Beansum Company and Shinn Cherng Company. While the rest of the companies are owned by the relatives and friends of the owner of Shinn Cherng Company's, Wu, Chih-Ming. As a result of this very fact, Shinn Cherng Company borrowed supporting documents of company registration of these companies owned by said relatives and friends, to take part in the tender and obtained the entire tariff quota for the year of 2007. The company's act violated the Fair Trade Law. Furthermore, during the process of the investigation, the information in related case files showed that in the process of the tender for tariff quota of red beans in Batch 971, a similar situation also occurred, and therefore, the Commission had these two cases consolidated.
2. Although Wu, Chih-Ming and his spouse, Chuang, Juei-Yun were registered as the owners of these two companies respectively, the findings of FTC after investigation showed that Wu, Chih-Ming is the actual owner responsible for business operation of both Beansum Company and Shinn Cherng Company. These two companies are the largest domestic enterprises, which import red beans and engage in wholesale business, and their sales targets are processors, food stores, and grain shops. The quantities of red beans imported for the past three years (from 2005 to 2007) were 2,289 tons, 3,341 tons and 4,355 tons respectively, and the percentage of each of these quantities to the total annual import quantity for each of the said three years were 36.25%, 51.71%, and 46.42% respectively.
3. The FTC further found out that prior to the tender for tariff quota of red beans in Batch 961 on November 17, 2006, that the quantity of red bean output is quite low as a result of warm winter at the end of the 2006 and beginning of 2007, and the future supply in the market would be hard-pressed. Wu, Chih-Ming, the owner of Beansum Company and Shinn Cherng Company, obtained the consent from the owners of Ju Chieh Company, Lim Kuang Company, and E-Green Company through, and borrowed the names of these companies to take part in the tender. Then, the five companies mentioned above participated in the tender with the aims of acquiring the entire tariff quota of red beans in Batch 961 and evading the limit of 500 tons of red beans per company. Consequently, each of these companies won the bid, with 500 tons of red beans per company, and the total of red beans won in this tender were 2,500 tons – it is 100﹪of tariff quota for red beans in Batch 961 was 100%. With respect to the deal with Ju Chieh Company, Beansum Company, Shinn Cherng Company promised to give away some profits in exchange, and promised to give discounts to Ju Chieh Company's future purchases of red beans, in order to acquired supporting documents of the registration. After winning the bid, Shinn Cherng Company paid Ju Chieh Company NT$ 49,000 as a profit to transfer the tariff quota. In addition, Beansum Company and Shinn Cherng Company remitted the royalty to E-Green Company together, and transferred the 300 and 200 tons of red beans under the name of Beansum Company and Shinn Cherng Company respectively. The tariff quota of 500 tons red beans won by Ju Chieh Company was also transferred under the name of Shinn Cherng Company. With respect to the Lim Kuang Company, since at the time when the Commission was investigating this case, Lim Kuang Company worried that it would be embroiled in a legal battle, it did not transfer under the name of either Beansum Company or Shinn Cherng Company. Instead, it handled the follow-up matters regarding the import of red beans in its own name. Moreover, the findings of FTC after investigation showed that with respect to the tenders for tariff quota of red beans in Batch 971 on November 16, 2007, Beansum Company and Shinn Cherng Company also obtained the consent from the owners of Ju Chieh Company, Glide Ltd., and Erhpang De Ltd. through Wu, Chih-Ming, and took part in the tender with the names of these companies. After Wu, Chih-Ming set the tender amount and the tender quantity; Beansum Company and Shinn Cherng Company paid deposits uniformly. After the deposits were paid, Beansum Company and Shinn Cherng Company participated in the tender in their own names and the names of Ju Chieh Company, Glide Ltd., and Erhpang De Ltd. After the bid opening, except for Ju Chieh Company, Beansum Company won the bid with 238 tons tariff quota, and Shinn Cherng Company, Glide Ltd., and Erhpang De Ltd. won the bid with 500 tons of tariff quota respectively. The total of tariff quota won in this tender were 1,738 tons –69.52% of the total tariff quota of red beans in year of 2008. Moreover, Beansum Company and Shinn Cherng Company remitted the royalty together, and transferred the entire tariff quotas from Beansum Company, Glide Ltd., and Erhpang De Ltd. respectively under the name of Shinn Cherng Company for centralized management .
4. Grounds for Disposition
   (1) The purpose for Bank of Taiwan to organize tenders for tariff quotas of certain agricultural products, such as red beans, is to secure the opportunity to fair participation in tenders by the mechanism of self-determination of price and quantity of individual enterprise, and at the same time, to let the unit offering tenders acquire the most favorable economic condition. Besides, in order to ensure the competitiveness of such an imported product in the domestic market and avoid massing the amount of tariff quota among the minority of enterprises, there's a maximum limit for the submission of a bid by a single enterprise. Because Beansum Company and Shinn Cherng Company borrowed the names of several companies, Ju Chieh Company, Lim Kuang Company, Glide Ltd., and Erhpang De Ltd., to take part in the tender for tariff quota of red beans. 100﹪of the tariff quota of Batch 961 and 69.52% of Batch 971 were obtained by these two companies, and the total amount exceeded the maximum limit regulated by the tender notices. This not only directly impaired other bidders' opportunities to win the tenders, but also made inroads on fair competition that focuses upon the essence of effect competition that encompassed the quality, prices, and services. These acts were reprehensible in terms of commercial ethics, and for other competitors that complied with the essence of fair competition, the actions of Beansum Company and Shinn Cherng Company constituted "obviously unfair" acts sufficient to affect trading order. Therefore, the Beansum Company and Shinn Cherng Company had violated Article 24 of the Fair Trade Law.
   (2) Although Ju Chieh Company, Lim Kuang Company, Glide Ltd., and Erhpang De Ltd. had no intention, through the competitive tender procedure, of obtaining the tariff quotas of red beans and importing red beans for domestic sales. They lent the supporting and company registration documents to Beansum Company and Shinn Cherng Company to participate in the tender, and accordingly helped these two companies avoid the maximum limit of 500 tons per tenderer. With the result that the two companies had in hand actually 100% of the tariff quota in Batch 961, and 69.52% in Batch 971, and the amount exceeded far more than the maximum limits regulated by the tender notices. It not only directly impaired other bidders' opportunities to win the tenders, but also made inroads on fair competition that focuses upon the essence of effect competition that encompassed the quality, prices, and services. These acts were reprehensible in terms of commercial ethics, and for other competitors that complied with the essence of fair competition, the actions constituted "obviously unfair" acts sufficient to affect trading order and violated Article 24 of the Fair Trade Law.
   (3) Beansum Company and Shinn Cherng Company were ordered to cease the aforesaid unlawful acts, and were imposed with an administrative fine of NT$ 1 million in accordance with the forepart of Article 41 of the same Law respectively. As for Ju Chieh Company, it was imposed with an administrative fine of NT$ 500,000. Moreover, Lim Kuang Company, Glide Ltd., and Erhpang De Ltd., an administrative fine of NT$ 200,000 was imposed respectively. With regard to E-Green Company, as the liquidation of E-Green Company was completed on December 27, 2006, the company's legal personality had no longer exist. Accordingly, it would not be necessary to continue looking into the legal implications of the acts of E-Green Company.

Appendix:
Beansum Agricultural Products Co., Ltd. 's Uniform Invoice Number: 22468253
Shinn Cherng Co., Ltd.'s Uniform Invoice Number: 15821716
Ju Chieh Ltd.'s Uniform Invoice Number: 70628510
Lim Kuang Enterprise Co., Ltd.'s Uniform Invoice Number: 04917757
Glide Ltd.'s Uniform Invoice Number: 28448467
Erhpang De Ltd.'s Uniform Invoice Number: 28601567
Summarized by Hsu, Cho-Yuan; Supervised by Liao, Hsien-Chou