Butter and Powdered Milk Importers

Butter and Powdered Milk Importers

1225th Commissioners' Meeting (2015)

Case:

The FTC initiated an ex officio investigation into suspected violation of the Fair Trade Law by domestic importers of baking butter and powdered milk

Keyword(s):

ANZTEC, butter, powdered milk

Reference:

Fair Trade Commission Decision of April 29, 2015 (the 1225th Commissioners' Meeting)

Industry:

Dairy Products Manufacturing (0850)

Relevant Law(s):

Article 14 of the Fair Trade Law (Article 15 of the current version)

Summary:

Prices of baking butter and powdered milk continued to rise in the country after 2013. Even after the ANZTEC took effect, the prices of the above products remained high. According to a newspaper report on Mar. 6, 2014, prices of imported powdered milk from New Zealand and Australia started to go up in August 2013 and the increase reached 75% compared to the same period the year before. Therefore, the FTC initiated an ex officio investigation to understand the price adjustment practices of related business and the competition in the market at issue.

Findings of the FTC after investigation:

(1) The FTC conducted several investigations in order to look into butter and powdered milk price adjustments made by related businesses. The major suppliers included Fonterra Brands (New Young) PTE. Ltd. Taiwan Branch (hereinafter referred to as New Young), Fonterra (ING.) Limited Taiwan Branch (hereinafter referred to as ING.), and Tehmag Foods Co., Ltd. (hereinafter referred to as Tehmag). On Mar. 14 and Jul. 10, 2014 the FTC inspected the quarterly data provided by the three businesses.
(2) According to information provided on the website of the Customs Administration of the Ministry of Finance, after ANZTEC took effect, the import duty reductions for regular butter, clarified butter and whole milk were respectively 5%, 8% and 10%. Again, the statistics of the Customs Administration on imported dairy products from New Zealand showed that the import prices in the first half of 2014 were obviously higher than those in the same period in 2013. The prices of regular butter went up 18.36%, clarified butter 49.84% and whole milk 43.62%. These figures supported the statements of related businesses about their purchasing costs. Further examination of the wholesale prices of New Zealand dairy products in the aforesaid period and the same period in 2013 listed on the Commodity Prices website of China Times revealed that the average price increase of domestic businesses was still compatible with the range of import cost increase.
(3) The principal products of New Young, ING. and Tehmag, the three major importers of butter and powdered milk from New Zealand, were not entirely the same. Take regular butter for example. Only New Young and Tehmag sold it. After ANZTEC took effect, the former made two price adjustments for regular butter it sold. The margins of adjustment were between 1.3% and 7.69% and its product prices were set between NT$3,850 and 4,200. The latter made 11 price adjustments of the same product that ranged between -3.74% and 4.69% and the product prices were set between NT$3.907 and 4,236. As for whole milk, ING. and Tehmag were the two suppliers. After ANZTEC took effect, the former made two price adjustments for whole milk that ranged between -11.79% and -9.3% whereas the product prices were set between NT$4,240 and 5,300. The latter made 10 price adjustments of the same product that were between -4.42% and 0.09% and set the product prices between NT$4,523 and 5,267. Meanwhile, ING. was the only company selling clarified butter and it made two price adjustments of the product after ANZTEC took effect. The margins of adjustment were between -20% and 3.88% while the product prices were set between NT$4,280 and 5,350. According to the above investigation results, the three businesses focused on different products and the number of price adjustments, margins of adjustment and product prices were all different.

Grounds for non-disposition:

Products sold by the three New Zealand butter and powdered milk importers, namely New Young, ING. and Tehmag, were not entirely the same and the number of price adjustments they made, the margins of adjustment and their product prices were also different. In fact, each business had increased and lowered prices. Therefore, there was no consistency on its face. After January 2013, the prices of dairy products imported from Zealand continued to go up and the import duty reductions after ANZTEC took effect did not bring down the operating costs of the said business significantly. The said businesses made price adjustments in accordance with their costs and management strategies. It was within the range of freedom of businesses. With the evidences it gathered, the FTC found it difficult to conclude any of the said businesses had violated the Fair Trade Law.

Summarized by Wang, Hsing-Yuan; Supervised by Yang, Chia-Hui

(1)	The FTC conducted several investigations in order to look into butter and powdered milk price adjustments made by related businesses. The major suppliers included Fonterra Brands (New Young) PTE. Ltd. Taiwan Branch (hereinafter referred to as New Young), Fonterra (ING.) Limited Taiwan Branch (hereinafter referred to as ING.), and Tehmag Foods Co., Ltd. (hereinafter referred to as Tehmag). On Mar. 14 and Jul. 10, 2014 the FTC inspected the quarterly data provided by the three businesses.
(2)	According to information provided on the website of the Customs Administration of the Ministry of Finance, after ANZTEC took effect, the import duty reductions for regular butter, clarified butter and whole milk were respectively 5%, 8% and 10%. Again, the statistics of the Customs Administration on imported dairy products from New Zealand showed that the import prices in the first half of 2014 were obviously higher than those in the same period in 2013. The prices of regular butter went up 18.36%, clarified butter 49.84% and whole milk 43.62%. These figures supported the statements of related businesses about their purchasing costs. Further examination of the wholesale prices of New Zealand dairy products in the aforesaid period and the same period in 2013 listed on the Commodity Prices website of China Times revealed that the average price increase of domestic businesses was still compatible with the range of import cost increase.
(3)	The principal products of New Young, ING. and Tehmag, the three major importers of butter and powdered milk from New Zealand, were not entirely the same. Take regular butter for example. Only New Young and Tehmag sold it. After ANZTEC took effect, the former made two price adjustments for regular butter it sold. The margins of adjustment were between 1.3% and 7.69% and its product prices were set between NT$3,850 and 4,200. The latter made 11 price adjustments of the same product that ranged between -3.74% and 4.69% and the product prices were set between NT$3.907 and 4,236. As for whole milk, ING. and Tehmag were the two suppliers. After ANZTEC took effect, the former made two price adjustments for whole milk that ranged between -11.79% and -9.3% whereas the product prices were set between NT$4,240 and 5,300. The latter made 10 price adjustments of the same product that were between -4.42% and 0.09% and set the product prices between NT$4,523 and 5,267. Meanwhile, ING. was the only company selling clarified butter and it made two price adjustments of the product after ANZTEC took effect. The margins of adjustment were between -20% and 3.88% while the product prices were set between NT$4,280 and 5,350. According to the above investigation results, the three businesses focused on different products and the number of price adjustments, margins of adjustment and product prices were all different.