[2020 National Audit] "Gas Corporation's Bid Rigging Amount Detected Over 5 Years: 4.4 Trillion Won"

Industrial Ministry Affiliate Bid Rigging Amounting to 7.5 Trillion Won Involves 59% Gas Corporation
"May Fair Trade Commission Sanctions 17 Companies for Distribution Panel Bid Rigging, No Police Investigation Requested
Despite Fair Trade Commission Investigation, No Investigation Request Letter Sent in 4 Years"
"Bid Rigging Led by Woo Kyung Electech, Exploiting Leniency System for 'Eat-and-Run Type Bid Rigging'"

Exterior view of the Korea Gas Corporation headquarters building. (Photo by Korea Gas Corporation)

[Asia Economy Reporter Moon Chaeseok] It has been revealed that the amount detected for bid rigging by Korea Gas Corporation over the past five years amounts to approximately 4.4 trillion won. It was also found that the Fair Trade Commission did not even request a police investigation for the bid rigging case involving distribution panel bids.

On the 20th, Lee Jang-seop, a member of the National Assembly's Industry, Trade, Energy, Small and Medium Business Committee from the Democratic Party, announced that an analysis of data received from the Gas Corporation showed that the amount detected for bid rigging over the past five years was 4.4528 trillion won, with fines totaling about 500 billion won.

Gas Corp: 4.4 Trillion Won Detected in Bid Rigging Over 5 Years

The Gas Corporation was found to have engaged in bid rigging in various projects including the 2016 liquefied natural gas (LNG) storage tank construction project (3.5495 trillion won), non-destructive testing services (49.5 billion won), UPS purchase (13.7 billion won), 2017 main pipeline pipe purchase (808.5 billion won), 2020 PHC pile purchase (12.1 billion won), and distribution panel purchase (19.5 billion won). The Fair Trade Commission issued corrective orders and fines accordingly.

Among the 70 companies detected in six bid rigging cases sanctioned by the Fair Trade Commission over the past five years, 12 companies participated in bid rigging more than twice. Of these, 40 companies won 121 projects worth 583.2 billion won commissioned by the Gas Corporation during the Fair Trade Commission’s investigation period. It was revealed that companies such as POSCO Construction (232.7 billion won) and Gyeongnam Enterprise (169.4 billion won) secured contracts.

Gas Corp Neglects Action After Bid Rigging Detection... Colluding Companies Continue to Win Contracts

Problems were also pointed out regarding the Gas Corporation’s follow-up measures after bid rigging was detected. In the case of distribution panel bids between 2013 and 2015, 17 companies colluded in bids amounting to 19.3 billion won, but the Gas Corporation did not request a police investigation. According to Article 315 of the Criminal Act, bid interference crimes can be subject to investigation upon request by investigative agencies.

The case took four years until the Fair Trade Commission’s disposition, but it was revealed that the Gas Corporation did not even send a single letter urging investigation. While the Gas Corporation neglected the bid rigging issue, seven of the 17 colluding companies won nine projects worth 3.6 billion won commissioned by the Gas Corporation. According to the "2018 Fiscal Year Fair Trade Commission Audit Review Report," only 14.2% of cases take more than three years until the Fair Trade Commission’s disposition.

In particular, the total contract amount for distribution panel purchase bids commissioned by the Gas Corporation from 2011 to 2019 was 67.3 billion won, of which the 17 colluding companies detected this time won 45.6 billion won (68%). Given the limited number of participants in bids due to the characteristics of the gas industry, the possibility of collusion is high, leading to reasonable suspicion that these companies have had close ties since the past, Lee pointed out.

Abuse of Leniency Program: 'Eat-and-Run Collusion'

Furthermore, Woo Kyung Electech, which led the bid rigging, was confirmed to have received a full exemption from the Fair Trade Commission’s fines by using the leniency program. This is a typical case of 'eat-and-run collusion.' Moreover, Woo Kyung Electech is currently requesting the Anti-Corruption and Civil Rights Commission to lift the two-year designation period as a debarred company imposed by the Gas Corporation, claiming to be a whistleblower. The leniency program refers to a system that reduces or exempts fines for companies that voluntarily report collusion activities.

Lee said, "The Gas Corporation is preparing measures to strengthen punishment and disadvantages for colluders, recover unfair profits from collusion, and enhance monitoring functions for collusion activities, but collusion still continues," emphasizing, "Proactive measures such as developing an AI-based bid rigging detection system should be prepared."

He added, "There are cases where companies that committed unfair acts abuse the leniency program to evade responsibility," and "I will work on legislation to strengthen the criteria and requirements for leniency program reductions."