Fri, Dec 06, 2013 - Page 3 News List

Court overrules FTC fines for chains’ java cost hikes

BREWING CONTROVERSY:The FTC plans to appeal a ruling clearing convenience chains of fixing coffee prices after a court said the increase was based on milk costs

By Yang Kuo-wen, Lee Ching-hui and Jake Chung  /  Staff reporters, with staff writer

The Taipei High Administrative Court on Wednesday overturned a decision by the Fair Trade Commission (FTC) to fine four convenience store chains a total of NT$20 million (US$675,600) for allegedly manipulating the price of fresh-brewed coffee.

The commission said 7-Eleven, FamilyMart, Hi-Life and OK-Mart had fixed prices because they each raised the cost of a cup of coffee by NT$5 in November 2011.

As the four chains account for 80 percent of the freshly brewed coffee market, the commission said they had the ability to fix prices and hurt competitors.

It said the price hike had influenced the entire supply and demand chain for fresh-brewed coffee in convenience stores and contravened Article 14 of the Fair Trade Act (公平交易法).

The commission fined the companies according to the scale and size of their operations, with 7-Eleven being fined NT$16 million, FamilyMart NT$2.5 million, Hi-Life NT$1 million and OK-Mart NT$500,000.

The convenience store chains appealed the fines to the Taipei High Administrative Court, which in December last year overruled the commission.

The commission subsequently appealed the case.

In Wednesday’s ruling, the Taipei High Administrative Court said that the price hikes did not constitute joint efforts to manipulate prices as it was difficult to prove that the four had colluded to fix prices, and the most direct reason for the price hike was an increase in the cost of milk.

It said that the market for coffee was extremely competitive and pricing in the industry was very transparent, which usually meant that if one company raised its prices others would follow suit. The same thing happened if the price fell, it said.

The price increase was “logical from an economic sense,” the court and ruled that the fines be repealed.

Commission spokesman Sun Li-chun (孫立群) said the ruling would be appealed.

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