FDG Recycling Industrial Co., Ltd. and 11 others

Supreme Administrative Court(2015)

Case:

Administrative suit filed by FDG Recycling and others over FTC’s sanctions for violation of the Fair Trade Law overruled by Supreme Administrative Court

Keyword(s):

Electronic waste disposal, agreed purchasing price, distribution ratio

Reference:

Supreme Administrative Court Judgment(2015) Pan Tzu No. 202

Industry:

Materials Recovery (3830)

Relevant Law(s):

Paragraph 1 of Article 14 of the Fair Trade Law (Paragraph 1 of Article 15 of the current version)

Summary:

1. FDG Recycling Industrial Co., Ltd. and 11 other companies were businesses engaging disposal of electronic waste in the country. Starting on Mar. 2, 2001, they signed a joint agreement on electronic waste recycling and disposal (hereinafter referred to as the agreement) and met on a regular basis until October 2011 to determine their purchasing prices for electronic waste and the percentage and quantity to be disposed of by each business. As the practice was able to affect the supply-demand function of the domestic electronic waste disposal market, the FTC concluded that it had been in violation of the concerted action prohibition regulation set forth in Paragraph 1 of Article 14 of the Fair Trade Law at the time and sanctioned the said parties.

2. The 12 offenders had acted according to related regulations and applied to the Environmental Protection Administration (the “EPA”) of the Executive Yuan in April 2011 and acquired their permission from the EPA to set up electronic waste disposal operations entitled to government subsidization. The said businesses collected electronic waste or purchased them from recycling establishments, dismantled such electronics and disposed of them. Subsequently, they applied to the EPA for subsidies according to the certified quantities they disposed of. Competition existed among the said businesses and they were horizontal competitors. However, starting in March, 2001, the 12 offenders started to sign the said agreement according to which all of the 12 businesses were to accept the percentages of electronic wastes distributed to them for disposal. A management team was also created to be in charge of the said distribution and each business issued the management team a cashier’s check to be the guarantee as set forth in the agreement. In response to change of market prices of recyclable electronic wastes, the management team would meet, discuss and decide new purchasing rates and each business would be informed of the new rates in writing and then purchase electronic waste accordingly. The management team also established penalty regulations. If any of the 12 businesses intentionally pushing up prices, lying about disposed quantities, hoarding electronic waste, transporting electronic waste across regions without reporting to the management team in advance, or accepting electronic waste transported across regions, its guarantee would be entirely or partially confiscated or would be given a fine, depending on the seriousness of the violation. The purpose of the above regulations was to assure each business would stick to the stipulations in the agreement. In other words, the offenders negotiated to reach the mutual understanding described above, abided by the agreement and operated under the supervision of the management team, and through an operation center to restrict each other’s business activities regardless of the difference in capital expenditure, cost structure and management and marketing capacity of each business. According to the established distribution percentages, those able to collect more electronic waste were required to give part of their recyclable resources to the ones who could not collect enough of their shares. Under such circumstances, competition between the originally horizontal competitors was rendered nonexistent. Meanwhile, as the prices for recyclable electronics were consistent, recycling operations were deprived of their ability to negotiate and the supply-demand function of the market was jeopardized. Therefore, the Supreme Administrative Court decided that the FTC’s original sanctions imposed in accordance with Article 7 and Paragraph 1 of Article 14 of the Fair Trade Law at the time were not inappropriate and therefore overruled the appeal of the offenders. The case was finalized after the Supreme Administrative Court decision was delivered.