Fair Trade Commission imposes 256.5 billion won fine for steel cartel... 7 major steelmakers referred to prosecution

Collusion in Procurement Bids for 6 Years by 11 Steelmakers Including Hyundai Steel
Pre-Determined Winning Quantities and Bid Prices... Rehearsals on Bid Day
7 Major Steelmakers Deny Collusion... Fair Trade Commission Refers Bidding Officials to Prosecution

Steel products such as hot-rolled coils being shipped from Hyundai Steel Dangjin Steelworks. [Image source=Yonhap News]

[Asia Economy Sejong=Reporter Lee Junhyung] Eleven steelmakers, including Hyundai Steel, who colluded in the rebar bidding market for six years, will face sanctions from the competition authorities. The authorities plan to file charges with the prosecution against the seven major domestic steelmakers who led the collusion.

The Korea Fair Trade Commission (KFTC) announced on the 11th that it will impose corrective orders and fines totaling 256.5 billion KRW on 11 steelmakers who colluded in the annual rebar price contract bidding conducted by the Public Procurement Service from 2012 to 2018. The sanctions target includes the seven major domestic steelmakers such as Hyundai Steel, Dongkuk Steel, and Daehan Steel, as well as four rolling companies including Hwajin Steel and Kosteel. A KFTC official stated, “This is a detection and sanction of secret and long-term collusion in the public sector rebar bidding market,” adding, “It is significant that we have corrected anti-competitive behavior in the rebar market, which has a large economic ripple effect.”

According to the KFTC investigation, the 11 steelmakers participated in the rebar bidding issued by the Public Procurement Service for about six years from 2012 to 2018 and pre-agreed on the winning quantities. The Public Procurement Service regularly conducts bids for 1.3 to 1.5 million tons of rebar for use by local governments and other public institutions. The volume ordered by the Public Procurement Service accounts for 10 to 15% of the total domestic rebar production, with contract amounts totaling approximately 950 billion KRW.

Allocation plan for rebar procurement bids by 11 steel manufacturers including Hyundai Steel from the Public Procurement Service.
[Photo by Korea Fair Trade Commission]

Accordingly, the 11 steelmakers allocated the Public Procurement Service’s bidding volume based on each company’s production capacity and past contract volumes with the Public Procurement Service. These companies also jointly decided on bid prices by passing notes among bidding managers. To ensure the success of the collusion, they checked the allocated quantities and bid prices for each company on the day of the Public Procurement Service bidding and conducted rehearsals. As a result of this collusion, the 11 steelmakers were able to win the Public Procurement Service’s orders with the pre-allocated quantities and bid prices.

The KFTC decided to file charges against the seven major steelmakers with the prosecution. Nine current and former bidding managers from the seven major steelmakers will also be charged. Although they led the collusion, they denied the collusion and did not cooperate with the KFTC investigation. The 11 steelmakers involved in the collusion will be subject to cease-and-desist orders.

The KFTC plans to strengthen inspections of collusion in raw materials and intermediate goods in addition to rebar. A KFTC official said, “In the current situation where concerns about price increases persist, we will strengthen monitoring of collusion in raw materials and intermediate goods that not only affect the daily lives of citizens but also undermine industrial competitiveness,” adding, “We plan to take strict measures with a zero-tolerance policy when collusion is detected.”