Newsletter
FTC LOST APPEAL IN THE CASE AGAINST CPC AND FPC
In 2004, Chinese Petroleum Corporation (CPC) and Formosa Petrochemical Corporation (FPC) were fined NT$6.5 million each by the Taiwan Fair Trade Commission (FTC) for their concerted actions in concurrently fixing their fuel prices. On 19 February 2009, the Supreme Administrative Court ruled that Taiwan's two largest motor fuel suppliers, CPC and FPC, had engaged in concerted actions in violation of Article 14 of the Taiwan Fair Trade Act (FTA). The Supreme Administrative Court further ruled on May 21, 2009 that the FTC's exercise of its discretionary power to determine the administrative sanction of the subject violation was defective and hence, the FTC's appeal was overruled and such judgment was final.
Regarding CPC and FPC's concurrently adjusting the fuel prices from 2002 to 2004, the FTC believed that the two companies agreed to adjust fuel prices in advance and announce the prices via mass media channels so that their fuel prices are the same at the same time; such arrangement affected the price and demand/supply of the fuel market, and was in violation of the restrictions on concerted action. As a result, CPC and FPC were fined NT$6.5 million each by the FTC for their concerted actions in concurrently fixing their fuel prices. The FTC's order was overturned by the Taipei High Administrative Court on November 30, 2006, and the FTC appealed to the Supreme Administrative Court.
The Supreme Administrative Court pointed out that although the FTC's sanction is to deter concerted action, which would affect the people's livelihood significantly, the FTC also conceded that any business model or mechanism needs to be observed over time; given the unique nature of the reliance interactive of operators in an oligopoly market, no conclusion that the two companies had violated the law can be reached on the basis of short-term observation or a few price adjustments, especially when there are many reasons for the same or similar prices; moreover, having the same or similar prices cannot be the sole basis for claiming that the operators have conducted concerted action. Consequently, the Supreme Administrative Court believed that the FTC should first give administrative guidance or a warning, and then impose sanctions if the two companies did not stop the violation.
The Supreme Administrative Court found that in a case involving horizontally competing enterprises concurrently matching prices by way of giving each other pricing information in advance, the authorities should adopt a measure that causes minimum damage to people's rights, such as administrative guidance, or warning; such approach would help the FTC enforce the FTA. In the subject case, the FTC immediately imposed fines on the two companies, and such decision has constituted a defect in the exercise of its discretion. Therefore, the Supreme Court overruled the appeals filed by the FTC regarding the sanctions imposed on CPC and FPC.