A Study on the Relationship between the Fair Trade Law and the Establishment of the Competitive Mechanism in the Fuel Market
The markets of fuel for consumer uses in Taiwan include the liquefied petroleum gas (LPG) market and natural gas (NG) market. The former had undergone two deregulations and has since been moving towards a competitive market. Due to scale of economies and capital requirements, the latter is still bilaterally monopolized. Therefore, the need to protect consumers’ interest calls for stricter scrutiny from the government.
The developments of and competition policies concerning these two markets in advanced countries have revealed the potential for NG operators to encroach LPG markets. In response to its market impacts, Japan has adopted the uncomplicated pipelining system as an interface and buffer zone for both markets, with 70 households as its dividing line, and brought the two markets under the regulations of “Gas Business Law” and “LPG Business Law” respectively. In contrast, antitrust law is the principal means employed by the U.S. government to regulate both markets.
Taking into account competition theories and the experiences from advanced countries, there are three fundamental ways to establish the competitive mechanism in the fuel market for consumer uses in Taiwan: (1) Increase the number of market participants to realize the effect of competition; (2) Incorporate the essential facilities as independent firms and impose thereupon the duty of fair and open access; (3) Introduce the uncomplicated pipelining system on the supply side.
Based on the research conclusions of this project, we suggest that: (1) more attention should be paid to unfair competition among upstream and downstream firms in LPG market; (2) studies on the issues of NG market scales should be encouraged to evaluate the possibility of further opening the market in the long run. In the middle, the separation of essential facilities during the privatization of Chinese Petroleum Company should be completed. For short-term purpose, the feasibility of efficiently applying the “contracted transportation” method should also be considered; (3) introduce Japanese uncomplicated pipelining system to create substitutability between suppliers in these two markets and thereby induce the emergence of a competitive mechanism.