Bill Proposed to Prevent 'Bee-like Bidding' by Paper Companies on LH Public Land Development Sites

One Company One Parcel: Housing Act Amendment Proposed
Imprisonment and Fines for Certificate Lending and Toleration
Gwangju Police Raid Jungheung and Jeil Construction Offices

Korea Land and Housing Corporation (LH) Gwangmyeong Siheung Project Headquarters / Photo by Yonhap News

[Asia Economy Reporter Noh Kyung-jo] A bill is being prepared to prevent construction companies from using fraudulent methods such as mobilizing paper companies when bidding on public land managed by Korea Land and Housing Corporation (LH).

According to the National Assembly Legislative Information System on the 6th, Kim Min-gi, a member of the National Assembly Land, Infrastructure and Transport Committee from the Democratic Party of Korea, introduced the "Housing Act Amendment" on the 3rd, which includes provisions prohibiting borrowing registration certificates (including the name and trade name of registered businesses) or conducting business or construction under another person's name or trade name without permission.

With large-scale public land supply planned for the 3rd phase of new towns, the aim is to prevent so-called "swarm bidding" through prompt institutional improvements.

The amendment prohibits conspiring to lend registration certificates or tacitly allowing it, and imposes administrative sanctions such as cancellation of registration and criminal penalties of up to one year imprisonment or fines up to 10 million won for violating registered businesses.

Inspections on registered businesses will also be strengthened. This is to filter out paper companies, and if LH or others request an inspection for public land supply, the head of the relevant local government must notify the inspection results within 30 days.

The timing of this amendment proposal coincides with the recent search and seizure of Joongheung Construction, Jeil Construction, and others by Gwangju police on charges of obstruction of business.

Previously, LH officially implemented the "one company, one plot system" in October last year, allowing only one company among a parent company and its affiliates to win public land bids. At that time, the Ministry of Land, Infrastructure and Transport requested police investigations into construction companies suspected of swarm bidding, including Joongheung, Jeil Construction, Hoban Construction, Woomi Construction, and Daebang Construction. Strengthening inspections of paper companies for bidding through amendments to the Housing Act was also anticipated.

An LH official said, "Administrative sanctions by local governments against these construction companies will be decided after the police investigation results are out," adding, "We are implementing internal guidelines such as outsourcing verification of affiliate relationships between companies to external professional accounting firms to prevent fraudulent bidding. We will strive to establish a fair market order."