Taiwan International Ports Corporation Ltd

Case:

Taiwan International Ports Corporation Ltd. violated the Fair Trade Law by imposing discriminative warehouse rental rates on cargo handling businesses

Key Word(s):

Taichung Port, cargo handling business, dock

Reference:

Fair Trade Commission Decision of September 4, 2013 (the 1139th Commissioners' Meeting); Disposition Kung Ch'u Tzu No.102154

Industry:

Supporting Services to Water Transportation (5259)

Relevant Law(s):

Article 10(iv) of the Fair Trade Law

Summary:

1. According to the complainant, Port of Taichung (originally the Port Authority of Taichung, Ministry of Transportation and Communications, and it was reorganized on March 1, 2012), Taiwan International Ports Corporation Ltd. (hereinafter referred to as TIPC) removed restrictions on bulk and general cargo handling operations in 2005. However, it continued to charge the rent on the basis of building costs of different warehouses. As a consequence, the complainant had to pay prices for warehouses rent that was different from those paid by Taichung Harbor Warehousing and Stevedoring Co., Ltd. (hereinafter referred to as THWS) and Tehlong Warehousing and Stevedoring Co., Ltd. (hereinafter referred to as TLWS). As a result, the complainant was unable to compete on a fair basis. The complainant thought this constituted discriminative treatment in the warehouse rental rates adopted by Port of Taichung.
2. Findings of the FTC after investigation:
   

   (1)

   The warehouse rentals charged by Port of Taichung were divided into two types, namely "warehouses built under collaboration and leased to the partner after the expiration of the rent-free period" and "warehouses built by former Port Authority and leased to users." The calculation formulas for the rent were established according to the warehouses construction type, building cost and risk management. The formula for the first type was the original building cost x 10%. As for the second type, it was the original building cost x (the construction cost general index for the year before leasing the warehouse/the construction cost general index for the year before building the warehouse) x (1+10%) x 10%.

   (2)

   The warehouses on Lots No. 5 to No. 8 (built under collaboration between THWS and Port of Taichung in 1976) were rented to THWS and those on Lots No. 12 to 15 (built under collaboration between TLWS and Port of Taichung in 1982) rented to TLWS. When the complainant started its cargo handling operation in Port of Taichung in 2005, the rental-free period for THWS and TLWS had already expired (lasting for 17 to 18 years). Therefore, whether the warehouses had been constructed under collaboration or by the former Port Authority, they belonged to TIPC. In addition, the building partners had enjoyed 17 to 18 years of use of the warehouses without rentals and there was no further need to recover their investments and minimize business risks. It was no longer legitimate or necessary to give them better rent offers than other competing tenant. Furthermore, since the two companies had continued to rent the warehouses for 15 to 19 years after the end of the rent-free period and the warehouses built by the former Port Authority were now over 27 years, there was no reason to differentiate the rentals. However, TIPC continued to calculate the rentals based on their "original building cost" for warehouses built under partnerships but used the "re-installment value or current value of the building" as the calculation basis when it came to warehouses built by the former Port Authority. The difference was obvious. As a result, compared to its competitors the complainant had paid an extra of NT$34.16 million as of 2012 for the warehouses on Lots No. 24 and 25 that it started to rent respectively in 2002 and 2005. It was a rather considerable amount. Apparently, new comers had to pay higher warehouse rents than existing competing tenants in the market. The adoption of such differentiated standards was likely to restrict competition or impede fair competition on the cargo handling market.

3. Grounds for disposition:
   

   (1)

   TIPC's collection of warehouse rents was divided into two types. For the ones not built under collaboration, the re-installment value or current value was applied as the basis of calculation while the original building cost was adopted to calculate the rents for those constructed under partnerships without reassessing the construction cost annual increase rate. It constituted discriminative treatment imposed on essential facilities for cargo handling businesses without justification and also abuse of market power by a monopolistic enterprise in violation of Article 10(iv) of the Fair Trade Law.

   (2)

   The reason behind the differentiated standards was that different regulations and procedures were applied to cargo handling businesses that started their operations at different times. The motive and objective of the unlawful practice had never been to create unfair competition. After assessing the expected unlawful gains, the damage incurred to trading order and its duration, the profits obtained through the unlawful act, the scale of the enterprise, its management condition and market status, the types and number of times of past violations, the intervals and proper penalties to be receieved, and remorse and attitude of cooperation throughout the investigation, the FTC acted according to the first section of Article 41(1) of the Fair Trade Law and ordered TIPC to make necessary corrections before June 30, 2014.

Appendix:
Taiwan International Ports Corporation Ltd.'s Uniform Invoice Number: 53026486

Summarized by Shen, Li-Wei; Supervised by Liou, Chi-Jung