Yichang Foods Co., Ltd.

Case:

Key Words:

slaughter, tie-in sale

Reference:

Fair Trade Commission Decision of November 17, 2010 (the 993rd Commission Meeting)

Industry:

Slaughtering (0811)

Relevant Laws:

Article 10 and Subparagraph 6 of Article 19 of the Fair Trade Law

Summary:

1. The Council of Agriculture forwarded to the FTC a petition from goose farmers in Tainan County complaining that there was only one legal meat goose slaughterhouse, namely Yichang Foods Co., Ltd. (hereinafter referred to as Yichang Co.), in the south of Yunlin County and the slaughterhouse demanded that all contracted meat goose farmers use only feed of a specific brand. They thought it was market monopoly. Meanwhile, the Control Yuan also requested the FTC to investigate whether the said legal slaughterhouse constituted tie-in sales by requesting contracted meat goose farmers to use only a specific brand of feed and was in violation of the Fair Trade Law(FTL) i.
2. Finding of the FTC after investigation: The FTC visited and interviewed the petitioners and Yichang Co., as well as sent a written request to the concerned feed manufacture for explanation. Aaccording to Article 5-1 of the said law, if the market share of an enterprise does not exceed one half of the market in concern or if it does but the total sales of the enterprise in the previous fiscal year did not exceed NT$100,000,000, the said enterprise is not considered a monopolistic enterprise. Regarding the petitioners accusation that Yichang Co. is a monopolistic enterprise described in the FTL, the FTC's findings showed that there were 18 legal slaughterhouses conducting slaughter of meat geese in this particular market and three of them were located around Tainan County. There was not only one slaughterhouse in southern Yunlin County as the petitioners had stated. Therefore, the meat goose farmers could decide which slaughterhouse they wanted to do business with. The investigation also revealed that the slaughter Yichang was accounted for about 14% of the slaughter among locall legal slaughterhouses. After calculation, the percentage constituted the sales volume of Yichang Co. is about NT$24,660,000 per year. Hence, in accordance with the aforesaid regulations, Yichang was not considered a monopolistic enterprise and no regulations against monopolistic enterprises could apply.
3. As for whether the demand that Yichang Co. imposed on meat goose farmers to use only a specific feed brand constituted tie-in feed sales in vthe FTL. According to Subparagraph 6 of Article 19 of the same law, the so-called "tie-in sale" refers to a situation in which there are two products that consumers can purchase separately but the supplier demands that the buyer purchase both at the same time or will refuse transaction. "Tie-in sales" may help save transaction costs, stabilize quality and promote the result of competition; therefore, it is not per se illegal. It has to be judged on the basis of rule of reason. According to the FTC's investigation, Yichang Co. did not use signing of supply contracts as a condition when dealing with meat goose framers and also did business with meat goose farmers without a contract. This is inconsistent with so-called tie-in sale conduct when the trading counterparts would be told expressly or impliedly that they could not make any purchase without buying the tied-in product. In addition, as the quality of feed could affect the quality of the goose meat, it was justifiable that Yichang, based on its long business experience, wanted to establish an agreement with the contracted farmers to use only feed of a specific brand. Based on the market status of Yichang Co., the structure of the market in concern, and the influence of the contract fulfillment on the market competition, available evidences were insufficient for regarding the demand the company imposed on the contracted meat goose farmer to use only feed of a specific brand as restricting or impeding competition. Therefore, the FTC decided that Yichang Co. had not violated the FTL.

Summarized by: Tseng, Wen-Chun; Supervised by: Liao, Hsien-Chou