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Gas price-fixing `a serious issue'

Price-fixing is deemed a very severe violation of the law especially in a sector such as gasoline retailing where the market is highly concentrated in two or three players, said Frederic Jenny, chairman of the Competition Committee at the Organization for Economic Cooperation and Development (OECD) at a press conference on Thursday in Taipei.

He was invited by the Cabinet-level Fair Trade Commission for a four-day visit to exchange views with the commission officials, the Supreme Court and the Cabinet-level Council for Economic Planning and Development.

Jenny, who is also judge of the French Supreme Court, said similar cases of oil price collusion have been found in France, Italy, South Africa and the US but due to the difficulty of securing concrete evidence, few guilty verdicts have been reached, making the crime difficult to deter.

For example, the US Senate last year questioned why the Federal Trade Commission had not really regulated gasoline suppliers' behavior in following each other with reciprocal price moves.

Jenny said that in a transparent market with only a few players, tacit agreements are often reached between companies as to when and how much prices will be hiked.

In addition, since oil distributors are highly integrated vertically, the costs for oil refining, distribution and retailing are hard to segment and therefore it is extremely difficult to unearth evidence of law-breaking and spot hidden extra profits.

His comments came at a time when the Fair Trade Commission is launching a second investigation into whether the nation's two largest oil refiners are guilty of price collusion. In fact, the commission has received numerous complaints from customers about possible collusion between the two companies, who had raised or lowered prices in sync more than 20 times since 2002.

Under Article 14 of the Fair Trade Act (公平交易法), state-run Chinese Petroleum Corp (CPC, 中油) and Formosa Petrochemical Corp (台塑石化) were fined NT$6.5 million (US$203,760) each last October for hiking prices simultaneously.

Undeterred by the punishment, the two companies repeated their simultaneous price hike in March and this month, prompting the trade watchdog to launch a second round of investigations.

Chen Jung-lung (陳榮隆), commissioner of the Fair Trade Commission, said yesterday the result of the investigation would be announced next month.

Chen said if the two refiners' violation of the trade law were to be confirmed a second time, they would be subject to a maximum administrative fine of NT$50 million each. Furthermore, the case would be transferred to prosecutors for the imposition of a criminal penalty of a maximum of NT$100 million and three-years' imprisonment for company executives, he said.

CPC controls about 70 percent of the nation's oil product market, and Formosa Petroleum the rest, a condition the commission called "insufficiently competitive."
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