Newsletter
FTC GUIDELINES ON PETROLEUM PRODUCT SUPPLY CONTRACTS
The FTC has recently prepared draft Guidelines on the Regulation of Contracts for the Supply of Petroleum Products. The draft sets out actions by suppliers which may contravene the Fair Trade Law (FTL), in order to remind companies to pay attention to avoiding them.
In the initial stage of the liberalization of the pe-troleum products market, the Formosa Plastics Group has not yet fully entered the market, so that China Petroleum Corporation (CPC) still enjoys a monopoly position. Hence the draft states that if CPC interrupts the supply of petro-leum products to filling stations, distributors or large-scale users without good cause, this may constitute abuse of monopoly power or ob-structing the entry of other enterprises into the market, either of which would contravene the FTL. If a petroleum products supplier seeks without good cause to restrict the right of a ser-vice station or other trading counterpart to ter-minate a fixed-term supply contract before its normal expiry, for instance on the grounds that the contract contains no explicit right to termi-nate, or by demanding a large payment on ter-mination, this may also constitute restricting competition or restraint of fair competition.
The draft also states that a petroleum products supplier may be in contravention of the FTL if without good cause it subjects service stations and petroleum products distributors etc. which have not signed long-term supply contracts or are not members of franchise chains to unequal treatment in terms of pricing, discounts or pay-ment terms, or refuses to supply products to ser-vice stations which have their own product brand or which have previously traded with a com-petitor.