Hualien County Liquid Fuel Trade Association

Case:

The Fair Trade Commission is dissatisfied with the Taipei High Administrative Court's judgment 91-Su-Tzu-1568 for the Hualien County Liquid Fuel Trade Association's violation of the Fair Trade Law, and filed an appeal with the Supreme Administrative Court that has annulled the original judgment and ruled that the Fair Trade Commission has won the lawsuit.

Key Words:

Trade association, gas cylinder, selling price adjustment

Reference:

High Administrative Court Judgment 95-Pan-Tzu-00284

Industry:

Gas Supply (4200)

Relevant Laws:

Article 14 of the Fair Trade Law

Summary:

1. This case originated from complaints by Hualien residents that the gas prices had continued to increase in Hualien area. There were suspicions that the Hualien County Liquid Fuel Trade Association (hereinafter referred to as the appellee) has uniformly determined the said price increases. The Fair Trade Commission's (FTC) found that the appellee had called a meeting of all Hualien area gas vendors at the Tung Shuai Hotel in March 2000. With the excuses of reasonably reflecting the costs and avoiding long-term loss, the Chairman of the said Association calculated that reasonable prices for household gas cylinders should be certain dollars. The vendors attended the meeting reached a uniform pricing agreement for household gas cylinders during the hotel meeting. The gas vendors in the Hualien County adjusted selling prices accordingly after receiving the Association's notification. The conduct of the appellee in restricting the market competition of Hualien area's cylinder gas distribution had violated the provision of Article 14 of the Fair Trade Law and thus the said appellee was punished for its unlawful conduct. The appellee is dissatisfied with the investigation result and thus filed an appeal with the Executive Yuan ( Cabinet). The Executive Yuan ( Cabinet) dismissed the said appeal. Thereafter, the appellee filed an administrative litigation with Taipei High Administrative Court. The Court revoked the appeal decision and the original punishment. The FTC thus filed an appeal with the High Administrative Court as dissatisfied with the aforementioned ruling.
2. Taking into account the intention of the debate and evidences of the investigation, the judgment of the High Administrative Court was held as follows:
   1. The real world observations showed that trade associations has usually played a leading role in most concerted actions of price hikes. Furthermore, trade associations are formed by enterprises and there exists competition among them. The charters or meeting resolutions for trade associations are made by their members directly or based on the authorizations of the member enterprises; and hence the decisions made by trade associations in essence are mutual understandings of their members. Therefore, the Fair Trade Law regulates the resolutions of trade associations and trade associations are enterprises defined in Article 2, Subparagraph 3 of the Fair Trade Law. Hence, the appellee in this case shall be governed by the said Law. Article 7 of the Fair Trade Law identifies the trading and competition activities engaged by the enterprises as basis for regulations. Therefore, the constitution of concerted action must include at least two competing enterprises. However, if the provision of Article 7 of the Fair Trade Law is interpreted strictly, it is very likely that the enterprises may use this Article to cover up their conducts and thus engage in the unlawful concerted actions and not subject to punishment. In addition to agreement or other forms of mutual understanding, the concerted action can be accomplished through organizations. Trade associations are typical form of concerted action accomplished through organization. The enterprises looking for concerted action have the options of discussion among one another for an agreement or other forms of mutual understanding, or through the resolution of their respective trade association. Regardless of the method chosen, the restraint on free competition is the same, and the impact on market function is also similar. Therefore, the Fair Trade Law shall give similar evaluation to both types of concerted actions; and should not handle the concerted actions differently just because they are different in terms of their appearances of agreement. For concerted action made through trade association, the respective trade association will be the principal entity making external expression of intent. Such expression is tantamount to the fact that the meeting of minds of such concerted action is initiated by the competing enterprises. That is to say, the reprehensions for those who have actually benefited are still the same from the internal economic viewpoint even though the principal entity of expression of intent has changed from the external legal viewpoint. This Court always has the opinion that it is appropriate for Article 7 of the Fair Trade Law to include trade associations into the list of the principal entity of concerted actions.
   2. The representative of the appellee called the association's members for a meeting at the end of March 2000. More than ten members attended the meeting and the formula of cost calculation previously used by the liquefied petroleum gas supply office was used to calculate the reasonable prices of a household 20-kg gas cylinder as NT$ 560 and a 16-kg gas cylinder as NT$ 450 in the meeting. The 12th Board of Directors and Supervisors name list for the appellee, its members list, statement of its representative, the company's basic information, statements given by the witnesses, Li Chen-Liang, Liu Chun-Hsuan, Liu-Chen Hsiu-Tsao, Luo Tsai-Sung, Weng Tsung-Jung and the uniform invoices enclosed with the original punishment, and the cost analysis of liquefied petroleum gas were enclosed for examinations. The consensus of raising the prices of gas cylinders was made through mutual understanding, the competing enterprises jointly determined the product prices, mutually restricted one another business activities, restrained the gas cylinder market competition in Hualien area, such conducts were sufficient to affect the market mechanism; and thus has violated Article 14 of the Fair Trade Law. The appellant in accordance with the anterior paragraph of Article 41 of the Fair Trade Law, ordering the enterprises involved immediately ceased their concerted action starting from the next day after receiving the dispositions. The enterprises involved should follow the said order immediately, and it is appropriate to uphold the appeal decision. It is unjustifiable for the appellee to file a petition of rescinding the disposition and the approval given by the judgment of first instance is groundless.

Summarized by Lai, Chia-Ching;
Supervised by Lee, Wen-Hsiu

Appendix:
Nil