Red Vermicelli Noodle Makers

1281st Commissioners' Meeting (2016)

Case:

Four noodle makers violated the Fair Trade Law for jointly raising handmade vermicelli noodle prices

Keyword(s):

Vermicelli noodles, trade association

Reference:

Fair Trade Commission Decision of May 25, 2016 (the 1281st Commissioners' Meeting); Disposition Kung Ch'u Tzu No. 105054

Industry:

Manufacture of Macaroni, Noodles, Couscous and Similar Farinaceous Products (0892)

Relevant Law(s):

Article 15 of the Fair Trade Law

Summary:

1. An informer complained about the members of the Taoyuan City Noodle Makers' Association jointly raising the price of handmade red vermicelli noodles by NT$3 per catty while the price of flour had not gone up. In other words, the price increase was not justifiable. Violation of the Fair Trade Law was suspected and the FTC therefore initiated an ex officio investigation.

2. Findings of the FTC after investigation:

   (1)

   After visiting and interviewing the informer and the Taoyuan City Noodle Makers’ Association, as well as conducting surveys for 3 times on the grains dealers in the Dihua Street area, the FTC found out that the price of handmade red vermicelli noodles had gone up indeed. Upstream suppliers confirmed the price increase took place in September 2015 and it was raised by NT$3 per catty. The six businesses involved included Tai Yi Vermicelli Noodles Enterprise Co., Ltd. (hereinafter referred to as Tai Yi), An Shun Noodles (hereinafter referred to as An Shun), Liang Hong Yi Enterprise Co., Ltd. (hereinafter referred to as Liang Hong Yi), Fu Fa Vermicelli Noodles (hereinafter referred to as Fu Fa), Jin Xing Noodles (hereinafter referred to as Jin xing) and Zhan Xin Vermicelli Noodles Enterprise Co., Ltd. (hereinafter referred to as Zhan Xin).

   (2)

   Tai Yi was a famous handmade vermicelli noodle producer. It established a mutual understanding with An Shun and Zhan Xin to increase the price. Later, in September 2015, An Shun used Line communications to inform Tai Yi that the price increase had been successfully done. In August and September 2015, Tai Yi also sent to Zhan Xin through Line information regarding the time and margin of price increase and also asked for confirmation. Apparently, the price increase was the idea of Tai Yi. This could be proven by the statements from the businesses involved and the above Line messages. Furthermore, An Shun notified its downstream retailers of the price increase on September 15, 2015 and this matched the time when it sent the Line message to Tai Yi. It also informed Jin Xing to make the same price adjustment on the same day. The testimony from Jin Xing could serve as evidences for this decision. Jin Xing then passed on the message to Liang Hong Yi and Zhan Xin (Zhan Xin never raised the price). Liang Hong Yi did not produce large amounts of handmade vermicelli noodles but decided to increase the price because of the phone call from Jin Xing. In other words, An Shun, Jin Xing, Tai Yi and Liang Hong Yi did jointly raise the price of handmade red vermicelli noodles by NT$3 per catty in September 2015.

3. Grounds for disposition:

   Article 15(1) of the Fair Trade Law provides that "no enterprise shall engage in any concerted action…" It is also stipulated in Article 14(1) of the same law that concerted actions are defined as those resulting in an impact on the market function with respect to production, trade in goods or supply and demand of services. However, such impacts on market functions do not have to actually affect market functions for the undertakings to be considered concerted actions. As long as the mutual understanding among the participating enterprises leads to any competition restriction, and the supply-demand function in the relevant market is endangered, it constitutes a concerted action. An Shun, Jin Xing, Tai Yi and Liang Hong Yi were major handmade red vermicelli noodle suppliers in the northern region. In order to prevent price increase by any single supplier from leading to loss of customers, they reached the agreement in September 2015 on raising the price of handmade red vermicelli noodles by NT$3 per catty and carried out the decision subsequently. The joint price increase did have an effect on the handmade red vermicelli noodle market in the northern region and was in violation of Article 15(1) of the Fair Trade Law. Therefore, the FTC imposed administrative fines of NT$250,000 on Tai Yi, NT$160,000 on An Shun, NT$150,000 on Jin Xing and NT$100,000 on Liang Hong Yi.