Waste Electronic and Electrical Equipment Disposal Businesses

Case:

Key Words:

waste electronic and electrical equipment, disposal business, operation center

Reference:

Fair Trade Commission Decision of October 3, 2012 (the 1092nd Commissioners' Meeting), Disposition Kung Ch'u Tzu No. 101142

Industry:

Non-Hazardous Waste Treatment and Disposal (3821)

Relevant Laws:

Article 14 of the Fair Trade Law

Summary:

1. The FTC received phone calls from private individuals complaining that the waste electronic, electrical and information equipment disposal businesses had offered different purchasing rates before they set up a joint operation center and, after the center was set up, the disposal businesses met regularly to decide purchasing rates. After an investigation, the FTC decided at the 1059th Commissioners' Meeting on Feb. 22, 2012 that E&E Recycling (hereinafter referred to as E&E) and 11 other domestic waste electronic and electrical equipment disposal businesses had violated Article 14(1) of the Fair Trade Law for their joint decision of purchasing rates for recyclable objects and proportional distribution of disposal work. Both practices were likely to affect the supply-demand function of the domestic waste electronic and electrical equipment disposal market. The offenders found the FTC's decision unacceptable and filed a petition. The Executive Yuan revoked the original decision and instructed the FTC to reconsider whether the businesses in question had been organized as a result of the encouraging policy of the competent authority of the industry, the Environmental Protection Administration (hereinafter referred to as the EPA), and also to investigate the profits they had obtained from the unlawful act and the profit percentages to serve as reference for decision of the fines.
2. Findings of the FTC after investigation:
   (1) Initially, the FTC met with the Recycling Fund Management Board (hereinafter referred to as the RFMB), the competent authority of the industry, to understand the related laws and regulations and the structure and current status of the industry. The FTC also sent the RFMB a written request for the list of the enterprises involved and the RFMB replied that there were 12 (13 plants) waste electronic and electrical equipment disposal businesses. Then, the FTC requested the EPA to provide a list of rates of subsidies offered to these businesses from 2003 to 2011 as well as how many businesses received the subsidies and the amount of subsidies each enterprise received between 2005 and July 2011. The data obtained were sorted and compiled into the "Ratios of Subsidies Given to Waste Electronic and Electrical Equipment Disposal Businesses by the RCMB" which indicated that the ratio of subsidies each business received was more and less the same.
   The FTC then requested the Financial Supervisory Commission, the Fiscal Information Agency, and the banks at which the businesses had set up accounts for access to the account details. From that access, the FTC discovered that large amounts had been transferred from the other businesses to E&E between 2003 and November 2010. Another finding showed that the businesses had opened an account under the name of "Joint Waste Electronic and Electrical Equipment Recycling and Disposal Management Team" at the Pingtung Branch of Union Bank. The FTC sent staff members to the involved businesses to record their statements and found out that the supply in the north was more sufficient than the south and large quantities were shipped from the north down to the south, usually by hiring returning trucks. Meanwhile, according to the statements the businesses provided to the FTC, their purchasing rates were about the same.
   The FTC also sent staff members to attain the statements of the downstream trading counterparts of the involved businesses and learned that the recycling operations could be divided into ordinary recycling operations, official recycling stations, and temporary recycling stations, according to their business scale and level of cooperation with the disposal businesses. The ones with the ‘station' status offered higher purchasing rates for waste electronic and electrical equipment than ordinary recycling operations. Afterwards, the FTC invited these operators to present their arguments, which were recorded. They were able to provide related evidences during the presentation. In total, the FTC obtained 14 pieces of evidences, including the minutes of some meetings on waste electronic and electrical equipment disposal.
   (2) Acting according to the decision of the Executive Yuan, the FTC investigated the financial reports of the offenders and the amount of waste electronic and electrical equipment they processed annually, obtained the general data on the net profit rates of waste disposal businesses from the Ministry of Finance, and also sent a written request to seek the opinion of the EPA about the arrangement of the joint recycling and disposal operations.
3. Grounds for disposition:
   (1) Parties intending to enter the waste electronic and electrical equipment disposal market have to apply for permissions from the EPA, according to related regulations and passed written and onsite evaluation, before they can begin the business of dismantling waste electronic and electrical equipment generated in the country each year. Therefore, the product market was the domestic waste electronic and electrical equipment disposal market. Meanwhile, since no waste electronic and electrical equipment was imported into the country and waste electronic and electrical equipment came from all over the country without any regional restriction, the geographic market involved in this case was defined as the entire country.
   (2) The data showed that there were 12 waster electronic and electrical equipment disposal businesses registered with the EPA, namely E&E, Hong Kuang, Han Lin, Jiu Fa, Liuh Jian, Perfect, FGD, Hong Chin, Ke Bai Sheng, Rui Yuan, Da Nan Fang and Da Qi. These businesses first acquired the status to apply for subsidies from the EPA before they collected waste electronic and electrical equipment themselves and from recycling operations, dismantle the objects, and then applied to EPA for subsidies. They were horizontal competitors of the same production-marketing stage. Between March 2001 and October 2011 (each business joined the concerted action at different times), they signed the "Joint Waste Electronic and Electrical Equipment Recycling and Disposal Agreement" and established the "Joint Waste Electronic and Electrical Equipment Recycling Management Regulations," as well as a set of penalty provisions. To ensure the fulfillment of the agreement, each business turned in a check or promissory note for NT$3,000,000 as the guarantee. Although Hong Kuang and Han Lin claimed that they had never signed the agreement or participated in the division of recycling and disposal work, the investigation indicated that they had indeed attended the negotiations, filled out daily recycling reports, made adjustments to their inventories, and split the expenses of Guo Meng (transliteration) Recycling Co., Ltd. As a matter of fact, Hong Kung joined the "joint waste electronic and electrical equipment recycling and disposal" operation at the latest in April 2011 and Han Lin in September of the same year. There was no doubt that the two businesses were part of the concerted action.
   (3) The regulations regarding the ratio of recycling and disposal work of each participant, the approaches to confirm inventories and quantities disposed, the establishment of the joint recycling and disposal operation fund and organization, the amount of the agreement fulfillment guarantee required, and the penalties for breach of agreement were all specified in the agreement for the concerted action. Meanwhile, it was set forth in the Joint Waste Electronic and Electrical Equipment Recycling Management Regulations that the council of signees was the highest decision-making body, with a management team and operation center under it. Also specified in these regulations were the purchasing rates for recyclable objects, execution of stock inventories, establishment of daily reports, work distribution and balance calculation, coverage of the agreement, management of the operation fund, as well as penalty provisions against "price increase manipulations," "hoarding" and cross-district acquisition. Each agreement signee took turns to serve as the convener. The management team meeting was convened each month and meeting minutes were taken every time. During these meetings, the businesses discussed and determined the purchasing rates. At the same time, the council of signees, the highest decision-making body, met quarterly to discuss important issues, such as acceptance of new members, work distribution ratios, handling of violations by the members, and so forth. The operation center under the management team was responsible for execution of decisions made at team meetings and enforced the management regulations. It also presented business reports to the management team on a regular basis and was in charge of distribution of recycling and disposal work among the plants, accounting, custody of documents of the management team, and general affairs.
   (4) E&E and the other waste electronic and electrical equipment disposal businesses signed the "Joint Waste Electronic and Electrical Equipment Recycling and Disposal Agreement" and operated through the management team and the operation center to allocate waste electronic and electrical equipment evenly among the businesses (except for E&E's Taipei plant which was given a slightly larger quantity) regardless of the capital expenditure, cost structure, and management capacity of each business. To achieve the established distribution ratios, those capable of collecting more recyclable equipment had to turn their surpluses over to the ones unable to collect as much through the operation center. As a consequence, the capacity utilization rate of most of the businesses was low, the resources were distributed inappropriately, the purchasing rates were stiff, and there was no competition at all.
   (5) According to the Huan-Shu-Ji-Zi Letter No. 1010083251 dated September 13, 2012 from the EPA, the EPA had never instructed or requested the said businesses to establish a recycling disposal team. It had never given its approval or received any document for reference. Therefore, there was no way for the EPA to have any knowledge of the distribution practice or exercise supervision. Apparently, the offenders' argument that the Joint Waste Electronic and Electrical Equipment Recycling and Disposal Team had been organized as a result of the EPA's policy was nowhere near the truth. The EPA, the competent authority of the industry, had repudiated the said argument made by the businesses.
   (6) E&E and the 11 other waste electronic and electrical equipment disposal businesses had violated Article 14 (1) of the Fair Trade Law. The length of time each business participated in the concerted action varied and the longest was about 10 years. After considering all the factors, the FTC made the decision according to the first section of Paragraph 1, Article 41 of the same law, ordered the businesses to cease the unlawful act, and also imposed an administrative fine of NT$17 million on E&E, NT$10 million on FGD, NT$10 million on Perfect, NT$10 million on Hong Chin, NT$8 million on Liuh Jian, NT$7 million on Jiu Fa, NT$7 million on Da Qi, NT$7 million on Da Nang Fang, NT$1.7 million on Rui Yuan, NT$1.7 million on Ke Bai Sheng, NT$ 800,000 on Hong Kuang, and NT$300,000 on Han Lin. The fines totaled NT$80.5 million.
   

Summarized by: Chen, Shu Hua; Supervised by: Wu, Lieh-ling