Tainan City LPG Business Association

Case:

Key Words:

Association, bottled LPG

Reference:

Fair Trade Commission Decision of May 18, 2011 (the 1019th Commissioners' Meeting), Disposition Kung Ch'u Tzu No. 100086

Industry:

Retail Sale of Other Fuel in Specialized Stores (4829)

Relevant Laws:

Article 14(1) of the Fair Trade Law

Summary:

1. 1. Huo Li Wang Gas Stove Shop intended to add LPG retail to its business and applied to Tainan City Government for a permit. However, before acquiring the permit, it started on May 1, 2009 to offer discounts to promote its sales in Li Siang Community in Anping District of Tainan City. Members of Tainan City Liquefied Petroleum Gas Association (hereinafter referred to as the offender) complained that the promotion by two LPG shops had a disadvantageous effect on their business. In response, the offender convened on the 16th of the same month an ad hoc board meeting in which the chairperson was authorized to handle the matter. The chairperson thus distributed a handout insinuating that the LPG shops conducting the promotion in the said community not only did not have insurance for its products but also were cheating on the volume of LPG in each bottle. Its action was designed to bar the said LPG shops from competing in the bottled LPG distribution (retail) market.
2. Findings of the FTC after investigation:
   (1)Between May 1 and June 21 of 2009, only Huo Li Wang Gas Stove Shop and An Ji LPG Shop were conducting promotion in Li Siang Community. Huo Li Wang Gas Stove Shop was in charge of delivery while An Ji LPG Shop was the one in charge of selling LPG. After Huo Li Wang Gas Stove Shop acquired its business permit on June 22, the two shops sold LPG separately.
   (2) The offender did authorize the chairperson to handle the matter regarding the promotion made by the two LPG shops and notified its members of its decision. The chairperson then acted accordingly and had printed more than 20,000 copies of handout that have been distributed in Li Siang Community on May 26 and June 8 respectively. The said handout was aimed at certain targeted competitor and the information it contained is not true. Therefore, the intention to affect the entry into market competition was obvious.
3. Grounds for disposition:
   (1)A trade association is composed of businesses of the same trade that compete horizontally and a concerted action is normally engendered through an official decision that has a binding effect on the members. Those who disobey the decision are likely to face sanctions. Therefore, out of their trust in the association, the members usually follow the association's decisions. Once a decision is announced to the members, there is a proliferation effect and the members may demand the association to act similarly to handle other matters.
   (2)The offender convened a meeting in response to the complaints from members about emerging competitors and authorized the chairperson to handle the matter. It was therefore reasonable to expect that the offender would resort to the same solution when similar events took place in the future. Eventually, the bottled LPG distribution market in Tainan City would grow rigid for lack of new or potential competitors and consumers would not be able to benefit from strong market competition. In addition, there were currently 105 LPG shops in Tainan City, with 100 of them being members of the offender. Hence, the conduct of the offender could have significant impact on the supply-demand function of the bottled LPG distribution market in Tainan City. It was in violation of Article 14 (1) of the Fair Trade Law and the FTC imposed on the offender an administrative fine of NT$100,000.

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