Gyeonggi-do Cracks Down on 'Fake Construction Companies' and 'Swarm Bidding' in 3rd New Town Development

Proposal for Joint Crackdown on Land Parcel Sales by Ministry of Land, Infrastructure and Transport and LH

[Asia Economy Reporter La Youngcheol] Gyeonggi Province is set to crack down on "mass bidding" in public land development projects, following its policy to eradicate "fake construction companies (paper companies)."

On the 22nd, Gyeonggi Province announced, "In consultation with the Ministry of Land, Infrastructure and Transport and Korea Land and Housing Corporation (LH), we plan to establish and implement a '3rd New Town Land Sale Mass Bidding Crackdown Plan.'"

Under current law, apartment land parcels are supposed to be bid on by only one company per bid right, but it is widely known in the industry that some companies use multiple fake companies (paper companies) to increase their chances of winning, a tactic known as "mass bidding."

According to a report by the Citizens' Coalition for Economic Justice, over the past decade (2008?2018), five specific construction companies monopolized 30% of LH's apartment land parcels (worth approximately 10.5 trillion KRW) by using paper companies.

This was also revealed in a pilot crackdown investigation on apartment land "mass bidding" conducted by Gyeonggi Province until March this year. Among three companies that won LH apartment land bids last year, one was confirmed to be a paper company established by a mid-sized construction firm.

This practice shifts the costs of company establishment and maintenance onto the sale price, undermining the fairness of bidding and increasing the cost of "owning a home."

The province plans to consult with the Ministry of Land, Infrastructure and Transport and LH on crackdown measures by May and will form a joint task force to begin full-scale enforcement in the second half of the year. LH is also considering including pre-crackdown information in its sale announcements.

The crackdown targets public land projects in the 3rd New Towns, which in Gyeonggi Province include 23 sites such as Namyangju Wangsuk and Goyang Changneung, covering 42.17 million square meters and 235,000 housing units.

The joint investigation team will examine winning companies' information provided by LH or GH, and if violations such as "mass bidding" are found, the winning bids will be canceled and administrative actions taken.

Since October 2019, the province has been conducting ongoing surveys of construction businesses registered in the province.