TFTC Penalized Dried Scallop Importers for Concerted Action to Hike Prices

June 2022

Aaron Chen and Sally Yang

The Fair Trade Commission of Taiwan (hereinafter, the “TFTC”) adopted during its Commissioners’ Meeting on May 5, 2022 the resolution that the behavior of six dried scallop importers to raise the prices of dried scallops constituted the concerted action under Article 15 of the Fair Trade Act (hereinafter, the “Act”) and imposed a fine totaling NT$5 million on the six operators.[1]

 According to the TFTC, the dried scallop products in Taiwan are primarily produced in Hokkaido of Japan, and the six importers are in reality respectively affiliated with the Teng Feng Group and the Li An Group, which together accounted for as high as 70% of the import.  Since the TFTC detected an abnormal scale and timing of price hikes of dried scallops on the market in the beginning of this year, it commenced market evidence collection during the Chinese New Year.

During the TFTC’s investigation, both groups asserted that they had to adjust prices because the cost of importing dried scallops had increased by nearly 30%.  However, the TFTC simultaneously requested import information from the Customs Administration of the Ministry of Finance and detailed information about the downstream trading counterparts of the two groups from the Fiscal Information Agency of the Ministry of Finance to analyze the sales percentages and price distribution of the two groups and downstream operators.  Meanwhile, companies in the same industry and downstream operators were interviewed and checked with analysis performed by summarizing the purchase prices and purchase quantities of different sizes of dried scallops.  The TFTC concluded after its investigation that the two groups had no reason for their consistent price hikes due to their different purchase costs.

In addition, the TFTC mentioned that the operators affiliated with the two groups had sent online prices of dried scallops and pictures of dried scallop products of their compititors, confirmed the goods and prices, and mentioned their business hardships and circumstances of stores that went bust through the LINE communication software.  They had also communicated and exchanged information about the dried scallop market and other price-related sensitive information to provide mutual hints to hike prices and exchange views, not to mention that they also engaged in consistent acts of simultaneous price adjustment on the surface.  This is sufficient to conclude that they communicated their intent to engage in concerted action.  According to the resolution adopted during the Commissioners’ Meeting, the six operators agreed to raise the prices of dried scallops, which is sufficient to undermine the supply and demand function of the dried scallop market and constitutes the concerted action under Article 15 of the Act.  A fine totaling NT$5 million, with NT$1 million on each of the four operators and a fine of NT$0.5 million on each of the other two operators, was imposed.

Brief analysis

 The exchange of sensitive trading information between enterprises is a common type of punishable concerted action.  For example, in a case involving bid-rigging in a CD-ROM procurement project, the TFTC rendered a decision that the enterprises involved had engaged in bilateral or multilateral contacts irregularly to share sensitive competitive information about the procurement projects of their customers (price quotations, expected bid ranking, etc.).[2]  In 2020, the TFTC also concluded that the exchange of sensitive trading information such as prices and sales volumes of hard disk drives to customers through bilateral contacts between TDK Group, a Japanese company, and the NHK Spring Group, its competitor, constituted concerted action.[3]  Therefore, the exchange of price and other sensitive information between competitors will run the risk of concerted action in violation of the Act and should be avoided by enterprises.

[1] The Gong-Chu-111022 Disposition of May 10, 2022 from the Fair Trade Commission.

[2] The Gong-Chu-101132 Disposition of September 19, 2012 from the Fair Trade Commission

[3] The 1514th Commissioners’ Meeting of the Fair Trade Commission on November 11, 2020