CJ Daehan Tongun and Hanjin Colluded in Agricultural Product Transportation for 12 Years... Prosecutors File Charges

Fair Trade Commission Detects Bid Rigging Among 12 Logistics Companies Including CJ Daehan Tongun and Hanjin
Bidding Rate Rises from 71.39% in Competitive Bids to 98.43% After Collusion
Fair Trade Commission "Strict Measures Will Be Taken When Public Institution Bid Rigging Is Detected"

[Image source=Yonhap News]

[Asia Economy Reporter Moon Chaeseok] Twelve companies, including CJ Logistics, were caught by the Fair Trade Commission (FTC) for colluding in bids for the transportation of imported agricultural products over 12 years. On the 6th, the FTC announced that it imposed a total fine of 5.449 billion KRW and decided to prosecute nine businesses.

According to the FTC, twelve freight transport operators including CJ Logistics and Hanjin colluded in 60 bids (contract amount approximately 55 billion KRW) for transportation services of imported agricultural products conducted by the Korea Agro-Fisheries & Food Trade Corporation (aT) from March 2006 to January 2018. The twelve companies are CJ Logistics, Hanjin, Kukbo, Dongbang, Dongbu Construction, Dongwon Loex, DTC, Lotte Global Logistics, Sebang, Intergis, Cheonil Jeonggi Freight Automobile, and KCTC.

aT held 60 bids during the period to select service providers for transporting imported general agricultural products such as rice, sesame, soybean sprouts beans, and peanuts, as well as refrigerated agricultural products like onions, potatoes, ginger, and garlic from Busan Port to storage bases nationwide. The transport operators predetermined the winning bidders in 50 of these bids and divided the awarded volumes according to their agreement.

Even after the lowest-price bidding system changed to a qualification evaluation system (where the bidder with the highest score is selected) in 2014, they shared bid prices in advance and allocated winning volumes sequentially. As a result, winning prices increased and the purpose of competitive bidding was nullified. The winning rate, which was only 71.39% during competitive bidding in January 2006, surged to 98.43% in March 2006 after collusion began.

The FTC judged that the actions of the transport operators violated Article 19 of the Monopoly Regulation and Fair Trade Act (Fair Trade Act).

The FTC decided to prosecute nine businesses excluding Hanjin, Dongbu Construction, and Cheonil Jeonggi Freight Automobile. It imposed a total fine of 5.449 billion KRW on eleven companies except Dongbu Construction. Dongbu Construction could not be fined according to Supreme Court precedents because its rehabilitation procedure was completed before the preliminary investigation began. Additionally, corrective orders were imposed on all twelve companies.

Moon Jaeho, head of the FTC Cartel Division, explained, "This action is significant because it strictly sanctioned a collusion that was secretly maintained for 12 years in bids for transportation services of stockpiled agricultural products imported to stabilize the supply of essential agricultural items for the public."

Moon added, "Since most of Korea’s leading logistics companies were subject to this action, it is expected to have a preventive effect against collusion across the entire freight transport sector. We will focus on monitoring public institution bids to prevent collusion, and if signs of collusion are found, we will promptly investigate and take strict measures."