Stevedoring Services at Prot of Taichung

1384th Commissioners' Meeting (2018)

Case:

The stevedoring services for bulk and general cargo carriers at the Port of Taichung violated the Fair Trade Law for engaging in bid rigging when participating in a tender for the procurement of stevedoring services to unload imported salt

Keyword(s):

Bulk and general cargo stevedoring service, unloading imported salt, tender

Reference:

Fair Trade Commission Decision of May 16, 2018 (the 1384th Commissioners' Meeting); Disposition Kung Ch'u Tzu No. 107027

Industry:

Other Service Activities Incidental to Water Transportation (5259)

Relevant Law(s):

Article 15(1) of the Fair Trade Law

Summary:

1. Complaints were filed against Taichung Harbor Warehousing and Stevedoring Co., Ltd. (hereinafter referred to as THWSCO) and Teh Long Warehousing and Stevedoring Co., Ltd. (hereinafter referred to TLWSCO) holding several secret meetings to discuss ways to push up the bid price for the "2016-2017 Tender for the Procurement of Stevedoring Services to Unload Imported Salt at the Port of Taichung" put out by Taiyen Biotech Co., Ltd. (hereinafter referred to as Taiyen Biotech). In the end, it was decided that THWSCO would participate in the final price negotiation and afterwards THWSCO would give feedback to TLWSCO in private or the two companies would provide stevedoring services together. The conduct was in violation of the regulation against concerted actions specified in Paragraph 1 of Article 15 of the Fair Trade Law and the FTC was requested to investigate and sanction the two companies
2. Findings of the FTC after investigation:
   (1)THWSCO, TLWSCO and Chien Shing Harbor Service Co., Ltd. (hereinafter referred to as CSHSCO) were the companies allowed to use all the public docks for bulk and general cargo stevedoring operations. Therefore, between Nov. 18, 2015 and Feb. 24, 2016, they were the three companies participating in the 2016-2017 Tender for the Procurement of Stevedoring Services to Unload Imported Salt at the Port of Taichung. .
   (2) The tender in question was one of the few public tenders conducted to procure stevedoring services at the Port of Taichung. Before the tender was first held in 2008, THWSCO and TLWSCO took turns to unload each ship. Competition did not become any tougher after CSHSCO entered the market in 2005. The first public tender was held in 2008 when Taiyen Biotech's salt warehouse was completed and CSHSCO filed complaints about the unfairness. As a result of the open bidding, the salt stevedoring service charge dropped from over NT$100 per unit to NT$44.88 and NT$49.20. When the public tender in question was conducted seven years later and bidders were invited at the end of 2015, it became an opportunity to increase the salt stevedoring service charge.
3. Grounds for disposition:
   (1)As CSHSCO was busy with other stevedoring operations and unable to handle the salt unloading work, THWSCO and TLWSCO took advantage of the opportunity. Between Nov. 2015 and Feb. 2016, the general managers of both companies met for bid price discussions and decided to raise the bid (the first time THWSCO offered NT$62.8, TLWSCO 68; the second time THWSCO offered NT$68.8 and TLWSCO 76). Both parties established a mutual understanding on bid rigging and restricting each others business activities. Cross references conducted on the testimonies from THWSCO, TLWSCO and related personnel from the two companies, LINE conversation records and the bid price lists for the tender in question indicated that THWSCO knew the bid price offered by TLWSCO before tender opening. Both companies completed their bidding on the same day and the bid prices offered by the two companies and the absence of TLWSCO at the bid opening were all proven consistent with the LINE conversation records. In other words, it was evident that both companies had discussed about their bid prices, decided who would be present at the bid opening, exchanged business information and executed accordingly. As a result of the conduct, the unit price in the labor procurement contract was much higher than in the past.
   (2) Being horizontal competitors, THWSCO and TLWSCO were supposed to fight with each other for business opportunities by offering more advantageous prices, better services and other transaction conditions. Nonetheless, they met to discuss and establish the mutual understanding to raise the bid price and restrict each other's business activities. The practice sabotaged the bidding mechanism of the tender in question and also affected the bidding function in the specific market. It was in violation of the regulation of "No enterprise shall engage in any concerted action?? set forth in Paragraph 1 of Article 15 of the Fair Trade Law.
   (3) After referring to Article 36 of the Enforcement Rules of Fair Trade Act, the FTC cited the first section of Paragraph 1 of Article 40 of the Fair Trade and imposed an administrative fine of NT$500,000 on THWSCO and NT$100,000 on TLWSCO.