Large and Medium-Sized Enterprises Collude on 20% of Metropolitan Area Purchase Volume Bids... "Pre-Allocation of Supply Volume"
[Asia Economy Reporter Moon Chaeseok] Seventeen companies and an association involved in so-called "quantity allocation collusion," where delivery volumes were pre-distributed during the public purchase bidding process for ready-mixed concrete (Remicon), have been fined over 19.8 billion KRW in penalties.
The Korea Fair Trade Commission (KFTC) announced on the 17th that it imposed corrective orders and fines totaling 19.813 billion KRW on 17 businesses and the Korea Ready-Mixed Concrete Industry Association for pre-allocating delivery volumes in the Remicon public purchase bids conducted by the Seoul and Incheon Regional Public Procurement Service from 2013 to 2016.
The sanctioned companies are Dongyang, Doosan Construction, Sampyo, Sampyo Industry, Sungshin Cement, Ssangyong Remicon, Asia, Asia Cement, Aju Industry, SP Nature, Eugene Corporation, Lee Soon Industry, Jigu Remicon, Hanla Encom, Hanseong Remicon, Hanil Industry, and Hanil Holdings.
According to the KFTC, these companies conspired to allocate delivery volumes in advance for the Remicon public purchase bids worth 479.9 billion KRW, targeting the quantities that the Seoul and Incheon Regional Public Procurement Service intended to purchase annually, distributing the volumes proportionally based on each company's association membership fees.
The association facilitated the collusion by preparing meeting materials regarding the allocation of delivery volumes per company and convening meetings to lead the collusion.
The KFTC judged that because each company pre-allocated delivery volumes, they were able to bid at the highest prices close to the predetermined prices. As a result, the average winning bid rate over the four-year bidding period was as high as 99.91%.
Until 2012, only small and medium-sized enterprises could participate in Remicon public purchase bids. Due to a system change, from 2013, large and medium-sized enterprises were allowed to participate in 20% of the purchase volumes in the metropolitan area. This collusion occurred regarding that 20% volume. All participants in the collusion were large or medium-sized enterprises.
The KFTC determined that this conduct constitutes "bid rigging," which is prohibited under Article 19, Paragraph 1, Subparagraph 8 of the Fair Trade Act.
Lee Jung-won, head of the Cartel Investigation Division at the KFTC, explained, "This action is significant in that it detected and sanctioned collusion conducted by large and medium-sized enterprises that became eligible to participate in Remicon public purchase bids."
The KFTC plans to promote anti-collusion activities such as holding meetings with businesses involved in public sector bidding and will actively cooperate with ordering agencies to strengthen capabilities to detect collusion.
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