Newsletter
TFTC Imposed Fines on Three Paper Companies for Price Fixing
In a decision dated April 14, 2010, the Fair Trade Commission (FTC) found that Cheng Loong Corp. ("Cheng Loong"), Long Chen Paper Company ("Loong Cheng") and Yuen Foong Yu Paper Company ("Yuen Foong Yu"), three paper companies, had violated the Fair Trade Act ("FTA") for increasing their prices at the same time and by the same amount to avoid competing with each other. Consequently, the FTC imposed a NT$5 million fine on Cheng Loong, a NT$3 million fine on Loong Chen and a NT$2 million fine on Yuen Foong Yu.
With respect to the recent industrial paper price-fixing, the FTC found that Cheng Loong, Loong Chen, and Yuen Foong Yu, which together controlled over 90 percent of the industrial paper market, set the industrial paper prices jointly during the period from November 2009 to March 2010, which violated the provisions forbidding concerted action under the FTA. Though industrial paper prices were indeed adjusted market-wide owing to the rising cost of waste paper, the three paper companies increased their listed prices simultaneously by a proportion that does not reflect the increase in the waste paper cost and also not consistent with the price raise among competitors. Also, the increase in price made by the three companies from November 2009 to March 2010 was different from that in 2007 and thus was inconsistent with the commercial practice in the paper industry. Moreover, purchasing costs of waste paper, the percentage of the revenues arising from industrial paper compared with the other business of the company, the cost cap, the amount of industrial paper exported, etc. varied among the three companies. However, despite the differences, the three companies still increased their prices simultaneously and at the same rate without any reasonable grounds. Therefore, it was clear that the three companies intended to eliminate price competition to gain illegal profits arising from their conspiracy.
In addition, the three companies also operated downstream paper processing companies as well as corrugated container businesses, and thus can be deemed to have a vertical integration advantage in the paper industry. In fact, approximately 20 percent of the corrugated cardboards used for the manufacturing of corrugated containers on the market were provided by Cheng Loong and Loong Chen. Since Cheng Loong and Loong Chen have integrated the markets vertically, they should benefit from the low manufacturing cost and thus be able to provide their products at low prices. Nevertheless, those paper processing companied owned by Cheng Loong and Loong Chen quoted their prices almost at the same time monthly without any differences in their respective prices. Moreover, their prices were higher than those of other paper processing companies. Therefore, it was obvious that Cheng Loong and Loong Chen capitalized on their vertical integration advantage to jointly control the paper prices at the paper processing stage to stifle competition in the market.
Given the above, the FTC imposed a NT$5 million fine on Cheng Loong, a NT$3 million fine on Loong Chen, and a NT$2 million fine on Yuen Foong Yu. Additionally, the FTC stated that damage to the market resulting from concerted action is more easily proved than any other violations under the FTA and thus reminded the industrial paper industry to respect the market mechanism and maintain fair competition.