6 LPG Distributors in the Cijin Area in Kaohsiung

Case:

Key Words:

unified pricing, bottled LPG

Reference:

Fair Trade Commission decision of March 24, 2010 (the 959th Commissioners' Meeting); 2010 Disposition Kung Ch'u Tzu No. 039

Industry:

Other Fuel Retailers (4829)

Relevant Laws:

Subparagraph 1 of Article 14 the Fair Trade Law

Summary:

1. An anonymous informant reported to the FTC that the liquefied petroleum gas (LPG) distributors (LPG retailers) in the Cijin area in Kaohsiung City had adopted concerted pricing by using the same phone call transfer service and selling LPG at the same rates. The FTC staff at the Southern Region Services Center contacted the LPG retailers in the said area to inquire about the prices of bottled LPG and concluded there was a very high possibility that the conduct of the said businesses was a concerted action and therefore the FTC initiated the investigation.
2. Findings of the FTC after investigation:
   1. There were six LPG retailers in the Cijin area (originally eight but one applied for temporary suspension of business and one closed down during the investigation) and one bottling plant (Hongli LPG Bottling Plant). Judging from where they are located, the six LPG shops were divided into two systems. Denan Enterprises (hereinafter referred to as Denan) and Hongcheng LPG Co., Ltd. (hereinafter referred to as Hongcheng) belong to the "Jhongjhou System", whereas Shengguang LPG Co., Ltd. (hereinafter referred to as Shengguang,) Jhenyi LPG Shop (hereinafter referred to as JhenYi,) Yunyisiang Co., Ltd. (hereinafter referred to as Yunyisiang) and Jusheng Co., Ltd. belong to the "Cijin System".
   2. The said six LPG retailers rented a section of Hongli LPG Bottling Plant and relocated from November 2008 to May 2009 all their businesses to the said rented location and distributed all the bottled LPG from there. Management was delegated to Kuo Yiciang, the owner of Denan. After acquiring the consent of the owners of the LPG retailers, Mr. Kuo set the price of bottled gas of the shops of each system at the same level, with a 10-dollar difference between the (20kg) bottles sold by the two systems (the ones from the Jhongjhou System being 10 dollars cheaper than those from the Cijin System.) Additionally, whenever China Petroleum Corporation (CPC) made price adjustments, Mr. Kuo would also be the person to coordinate with the LPG retailers to determine the range of adjustment of bottled LPG prices. For instance, when CPC lowered the price per kilogram of LPG by 5.5 dollars (or 110 dollars per 20kg bottle) on November 2, 2008, the LPG retailers reached an agreement to cut only 50 dollars per bottle.
3. Grounds for Disposition:
   The Cijin area is long and narrow in contour, connected to downtown Kaohsiung only by the cross-harbor tunnel. In other words, it is somewhat isolated and bottled LPG suppliers from outside the area do not provide much service for the Cijin area. The amount of LPG sold by the said six LPG shops between November 2008 and May 2009 accounted for 78.5% of the total gas supply. Obviously, the agreement among the LPG retailers had a serious effect on the bottled LPG distribution in the Cijin area and was in violation of Subparagraph 1 of Article 14 of the Fair Trade Law. These LPG retailers were therefore fined between 50,000 to 110,000 dollars respectively.

Summarized by: Hung, Chin An Supervised by: Sun, Ya Chuan

Appendix:
Denan Enterprises' Unified Business No.: 79636998
Shengguang LPG Co., Ltd. 's Unified Business No.: 82033710
Jhenyi LPG Shop's Unified Business No.: 79350108
Yunyusiang Co., Ltd. ‘s Unified Business No.: 81000965
Jusheng Co., Ltd. ‘s Unified Business No.: 79701667
Hongcheng LPG Co., Ltd. ‘s Unified Business No.: 82028337