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In a decision dated 19 October 2011, the Fair Trade Commission (FTC) found that Wei-chuan, Uni-President and Kuang-chuan, three leading dairy product suppliers, had violated the prohibition against concerned action under the Fair Trade Act ("FTA") for increasing the prices of milk products at the same time and by the same price amount, which has affected competition in the domestic milk product market. Consequently, the FTC imposed a fine of NT$12 million on Wei-chuan, NT$10 million on Uni-President and NT$8 million on Kuang-chuan.
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According to the FTC's investigation, the combined share of Wei-chuan, Uni-President and Kuang-chuan in the domestic milk product market is over 80%. Recently, because of increased cost of raw milk, milk product suppliers felt the pressure to raise milk product prices. Nonetheless, Wei-chuan's, Uni-President's and Kuang-chuan's price hikes do not reflect their respective costs of purchasing raw milk. Moreover, these three dairy suppliers raised the price of their products by the exact same amount. For example, all the prices of Wei-chuan's, Uni-President's, and Kuang-chuan's one-liter milk products were raised by NT$ 6 regardless of their original prices. The same phenomenon can be observed in these suppliers' two-liter milk products. This situation was counter to the commercial practice because Wei-chuan, Uni-President and Kuang-chuan should have different pricing structures. Consequently, the FTC concluded that this price adjustment by Wei-chuan, Uni-President and Kuang-chuan was reached through conspiracy among them.
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The FTC further explained that the price adjustment exceeds each supplier's raw milk cost, which is an evidence of their concerted action. As the cost of raw milk increased by only NT$2 per liter, Wei-chuan's, Uni-President's and Kuang-chuan's uniform price raise of NT$6 per liter appears suspicious. That is, because Wei-chuan, Uni-President and Kuang-chuan should have different factors to consider in terms of price increase, how come they simultaneously added NT$4 more (NT$6 minus NT$2) to the new milk product price? According to the FTC, such uniform price increase could not have been achieved unless illegal coordination existed among them. Since Wei-chuan, Uni-President and Kuang-chuan jointly hold a more than 80% share in the Taiwanese milk market, this conspiracy has jeopardized consumers' interests.
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The FTC pointed out that a concerted action can be proved not only by direct evidence such as a contract or agreement, but also by circumstantial evidence or empirical rules. In the subject case, three suppliers' uniform price increase without being supported by reasonable calculation method can be a circumstantial evidence for their conspiracy.
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It is noteworthy that this is not the first time the FTC penalizes dairy suppliers for price increase. In 2007, the FTC had ever imposed a fine on the same parties, i.e., Wei-chuan, Uni-President and Kuang-chuan, on the ground that their price increase in milk product had affected trading order in the relevant market. Nonetheless, the FTC's 2007 decision was revoke by the Petitions and Appeals Committee of Executive Yuan. Whether the FTC's decision this time will be upheld should continue to be monitored.
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