Mon, May 31, 2004 page11

• Fair trade enforcer faces massive backlog of cases

  The Fair Trade Commission's 12-year performance record has received mixed reviews. Its chairman, Hwang Tzong-leh talked with `Taipei Times' staff reporter Amber Chung about his agency's commitment to fair competition and efforts to enhance international collaboration with major countries on trade policy.

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  Taipei Times: Foreign companies have been complaining about barriers to and a lack of transparency in bids for government procurement contracts in their white papers for years. What is the commission's role in this area?

  Hwang Tzong-leh (黃宗樂): One of the commission's major tasks is to remove the limitations and barriers to the market since our establishment. And we have been putting much of our focus into this aspect.

  

  Fair Trade Commission Chairman Hwang Tzong-leh finds no problems with Microsoft Corp's local monopoly.

  PHOTO: CHIANG YING-YING, TAIPEI TIMES

  Before the Government Procurement Act (政府採購法) went into effect in 1998, we did take charge of some government procurement issues, such as bid-rigging. After the law was implemented, government procurement was placed under the authority of the Cabinet's Public Construction Commission.

  But we still look after issues that are not included in the government procurement regulations and involve fair-trade stipulations, such as unfair competition between the bid winners and competitors or subcontractors.

  TT: Take the liquid natural gas (LNG) supply contract for Taipower's Tatan power plant in Taoyuan County. There have been queries about bidder qualifications made by the government at the time.

  Hwang: Basically, the managing agency in this case is the Ministry of Economic Affairs and I think they have their own ways or procedures for making requirements. The commission respects the managing agency's authority, with the precondition that there is no violation of the Fair Trade Law (公平交易法).

  I am not clear if the government agency intended to rule out foreign bidders in this case. But this was not such a violation of fair trade rules. If there exist illegal actions such as bid-rigging, which infringes the fair trade regulations, we will then step in.

  TT: Then does the Fair Trade Law extend protection to foreign investors in Taiwan?

  Hwang: Foreign companies are undoubtedly under the protection of the Fair Trade Law. We treat them equally without discrimination in this respect. They have the same rights and, of course, bear the same obligations as their local peers in complying with the regulations.

  Take Esso Petroleum Taiwan Inc (台灣埃索) [A joint venture between ExxonMobil and Pan Overseas Corp (匯僑)]. The company complained to us around two years ago about barriers to the local oil market, where Chinese Petroleum Corp (中油) and Formosa Petrochemical Corp (台塑石化) are the two major suppliers with a nearly 70 percent and 30 percent share of the market, respectively.

  We then undertook to investigate whether the local suppliers had unduly reduced prices to hinder newcomers from entering the market. But after an investigation, we found that the scale of the price cuts by the two local refiners did not exceed legal limitations. [Editor's note: Esso Petroleum withdrew from Taiwan last year because of increasing losses and the small-scale of the local market.]

  TT: Taiwan's two major oil refiners almost always adjust their wholesale oil prices at the same time, with the same markup or reduction. Would this qualify as collusion under the Fair Trade Law?

  Hwang: Oil prices are an issue that most people are concerned about, as well as being the focus of media and legislative attention. The most critical concern is whether there exists a "concerted action" between the two oil suppliers to jointly raise prices.

  The two companies have raised oil prices 17 times between 2002 and last month. We have also probed the price hikes twice over the same period. The result of our investigations suggested that there was no clear evidence, no form of obvious agreement or tacit understanding, in the joint price hikes. However, given the timing and scale of the previous price hikes, we did warn the companies against acting as an illegal cartel.

  We will keep our eyes on any improper price changes by the monopolistic Chinese Petroleum as well as any collusion in price hikes by two major suppliers if there is any price adjustment in the future.

  TT: Besides oil, prices of steel and necessities of life such as flour, sugar and sticky rice have been rising since the beginning of the year, resulting in alleged hoarding. Have you found an evidence of illegitimate stockpiling?

  Hwang: We cannot rule out the possibility that businessmen plan to make more money by exploiting natural price hikes. The question is whether they make undue profits, far more than they deserve.

  On the necessities of life, we focus our investigation on any hoarding, artificial manipulation of prices or joint markup by wholesalers or distribution networks. But we also need to be careful not to force down market prices while launching an investigation.

  The price of sticky rice is a good example. Price and supply have become stable since we stepped in earlier this year. Considering that an oversupply could backfire on farmers, who are usually among the disadvantaged and victims of unfair trade, we had to keep a fine balance between an all-out investigation and substantial benefits for farmers.

  Moral persuasion could be our first choice and punishment reserved as the last resort. But, as these cases are in course of investigation and have not been submitted to the commissioners for a final decision, I am not allowed to disclose the details and it is too early to gauge the results.

  TT: The EU imposed a huge fine of 497 million euros (US$613 million) on Microsoft Corp for exploiting monopoly power in late March. Has this inspired the commission to resume its investigation into the US software giant after reaching administrative reconciliation last year?

  Hwang: The EU and Taiwan are two different entities and the two parties' focus is different as well.

  Unlike European countries, there are no Taiwanese companies suffering from unfair competition because of Microsoft's monopoly of the market. Therefore, we put much of our stress on the company's improper pricing.

  The investigation into Microsoft was the commission's largest case ever, with most investment of manpower and effort. This case also earned us most front-page coverage.

  Considering that a long drawn out investigation and possible appeals by Microsoft might not have been beneficial to consumers, we thought administrative reconciliation would be an ideal and timely method that would serve the best interest of all the parties.

  TT: Do you think the administrative reconciliation ruling will work? Will you resume an investigation?

  Hwang: We think the reconciliation agreement successfully forced the company to cut product prices by more than 20 percent and to share the source code of part of its products with the government and private sector clients.

  We would probably not resume our investigation unless the company fails to comply with the agreement or other fair trade regulations, but certainly we will keep watching Microsoft's implementation of the terms in the agreement as long as it remains valid, which is until 2008.

  TT: What are difficulties facing the commission in handling cases so far?

  Hwang: We have been suffering from manpower shortages in handling a variety of unfair trade cases at the same time with around 200 staffers, especially in dealing with such significant, high profile cases as Microsoft's.

  We are aware that it is a global trend to undertake government restructuring. However, fair trade cases actually increase as a country advances. Take Japan for example. Its fair trade authority has added more manpower whereas other agencies are reducing their staff numbers.

  With multilevel marketing as our major focus in the next three years, we do hope for an increase in personnel and funds in order to set up a division exclusively responsible for this area.

  TT: Taiwan became member of the Competition Committee under the Organization of Cooperation and Development (OECD) in 2002. What does this mean to Taiwan? What kind of role does the commission play and what is its achievement in the OECD?

  Hwang: This was indeed a breakthrough for Taiwan and an opportunity for us to be one of the architects of international competition standards.

  By sharing our policy-making process and implementation experience during the annual meetings and helping provide funds for the OECD to hold global or Asian forums, we are building closer connections with the international community.

  Given our reputation in this area, we are helping Southeast Asian countries such as Vietnam by offering assistance in the enactment and enforcement of laws. Thailand, for example, also sent two of its officials here to observe and study how Taiwan carries out its fair trade regulations. The OECD also asked for our comments on China's competition bill which is currently being formulated.

  TT: What are your plans for enhancing international cooperation?

  Hwang: We are scheduling a visit to the EU in September to explore this likelihood. The US, Canada and Japan are also our targets for enhancing future trans-national collaboration. We may start from a single case and then move gradually to formal bilateral cooperation relations.

  We expect to expand our trilateral agreement with Australia and New Zealand [signed in 2002] to a regional competition framework by including the US and Canada in the future. But that will take quite some time.
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