Liquid ammonia, improper price

1. The FTC received a complaint from Orient Union Chemical Corporation (hereinafter referred to as OUCC) about Taiwan Fertilizer Co., Ltd. (hereinafter referred to as TAIFER) being the only domestic liquid ammonia supplier yet selling liquid ammonia over the years at prices much higher than the Far East CFR prices (average raw material costs in East Asia) indicated in the Fertecon Ammonia Report. The price difference per ton was between US$100 and 150. Furthermore, from 2013 to early 2015, the price difference even reached the price of NT$300 per ton. Therefore, OUCC thought TAIFER was in violation of Subparagraph 2 of Article 9 of the Fair Trade Law.
2. Findings of the FTC after investigation:
   TAIFER started to use a new pricing method for liquid ammonia in March 2015. Before March 2015, the prices of raw materials for liquid ammonia and import costs were the basis of TAIFER� price adjustments. Afterwards, cost-plus pricing was adopted. In other words, the new storage cost for the month was added to the beginning inventory cost of liquid ammonia at the beginning of each month and the estimated new beginning inventory cost was established. Then, a fixed gross margin was applied as the price adjustment standard. According to the financial reports of TAIFER, the gross margin and operating margin in 2013 and 2014 were not higher than other years. Although a fixed gross margin was set as the price adjustment standard after March 2015, price changes occurred mainly as a result of amortization of the high expenses required for the company to relocate liquid ammonia production equipment from the Kaohsiung Plant to Taichung Harbor, and the expenses spent on the building of a dock and liquid ammonia storage tanks. Under such circumstances, the pricing method in question had to be considered justifiable. Meanwhile, another finding of the FTC� investigation showed that the international market price TAIFER referred to for liquid ammonia price adjustments over the years was the company� actual material import cost, not the average Far East CFR price for East Asia. As shown in TAIFER� price adjustment records, the company� liquid ammonia prices did fluctuate with the raw material price changes between 2011 and 2015. For this reason, it was difficult to consider TAIFER� liquid ammonia prices inconsistent with international market prices over the years. The prices of raw materials for liquid ammonia could serve as a reference for concerned businesses to understand liquid ammonia price tendencies, but they could not indicate other expenses derived from the backend operations of each company. In fact, in addition to the raw material cost, the structure of liquid ammonia cost also included import duties as well as plant and dock expenses and storage costs. The comparison of TAIFER� liquid ammonia prices, which take inventory costs into account, with the cost of raw materials for liquid ammonia did not show any inconsistency. Moreover, as the difference between TAIFER� liquid ammonia selling prices and liquid ammonia material costs was subject to market price fluctuations, impost costs and storage costs, it was impossible to conclude TAIFER� pricing practices was inappropriate. Hence, based on available evidence, the FTC found it hard to determine that TAIFER� pricing practices and price adjustment method were in violation of Subparagraph 2 of Article 9 of the Fair Trade Law. However, to prevent the company from engaging in any illegal activity or affecting trading order, the FTC issued a letter to remind TAIFER to abide by related regulations in the Fair Trade Law.