The Relation of Market Competition and Division by Region, Verticle Restriction Articles and Fair Trade Act
There are four objectives of this project: (i) to study the appropriate policies to be taken on gas stations market after the liberalization of oil products; (ii) to analyze the competition of gas stations by regions; (iii) to evaluate the deregulation policy on long-term contract between oil suppliers and gas stations; (iv) to compare different countries' limitation on vertical integration as it is changed after the oil market liberalization.
The major findings and conclusions are as follows:
1. Policy on merger:
i) To adopt HH1 index and the related court ruling of the United States to decide FTC action on horizontal and non-horizontal mergers.
ii) To regulate the non-horizontal mergers with looser restriction than that of the horizontal mergers.
iii) To pay more attention to the merger across industries, especially that of gas stations merges with convenient stores.
iv) To consider the regional differentiation on competition, referred to the regional HH1 study and degree of market competition on gas station in this study.
2. Policy on long-term contract:
i) One to three year contract is more common in the United States and Singapore.
ii) Fair Trade Act includes no articles to restrict long-term contract after the liberalization of oil market.
iii) If the FTC (Fair Trade Commission) consider the entry of Formosan Oil Corporation into the market complies its definition of liberalization, there is no need to forbid the long-term contract between oil suppliers and gas stations. However, if FTC thinks that the market liberalization is still not materialized, contract shorter than three years can be made.
3. The policy on vertical restriction article in the contract.
From the case studies of the United States and Singapore, the 'direct oil delivery' from oil supplies to the gas stations is rather common, if the gas stations are licensed from the specific oil supplies. Consequently, the direct oil delivery article contained in the contract between Chinese Petroleum Corporation and its licensed gas stations is acceptable.
However, it is the responsibility of the FTC to monitor the fairness of the oil delivery charge from oil supplies to the gas station.
4. Policy on merger across industries
i) It should not be allowed that the oil suppliers to demand its licensed gas stations to accept counterpart without their consent in the case of 'merger across industries.'
ii) HH1 index combined with non-quantifiable index should be employed as well in the case of 'merger across industries.'