Gangwon Alpensia Bid Rigging KH Group Fair Trade Commission 51 Billion Won Fine Imposed

Chairman Baesang Yoon and Others to Be Prosecuted by the Prosecution

KH Group's six affiliates and Chairman Bae Sang-yoon have been sanctioned by the Fair Trade Commission for bid-rigging in the Alpenesia Resort tender in Gangwon Province.

On the 17th, the Fair Trade Commission announced that it would impose corrective orders and a fine of 51.04 billion KRW for violations of the Monopoly Regulation and Fair Trade Act by six companies affiliated with KH Group. Four companies?KH Philux, KH Construction, KH Gangwon Development, and KH Rural Industry?and Chairman Bae Sang-yoon of KH Group will be referred to the prosecution.

According to the Fair Trade Commission, these six companies colluded on the successful bidder, cover bidders, and bid prices during the public tender for the sale of Alpenesia Resort assets, which was ordered by Gangwon Development Corporation, a 100% investment by Gangwon Province, in June 2021. The six companies are KH Philux, KH Electronics, KH Construction, IHQ, KH Gangwon Development, and KH Rural Industry, among which KH Gangwon Development and KH Rural Industry are paper companies established for this asset purchase.

Alpenesia is a complex tourism resort developed by Gangwon Province with a project cost of 1.6377 trillion KRW for the 2018 Pyeongchang Winter Olympics. After the Olympics, due to financial difficulties, Gangwon Province decided to dispose of Alpenesia Resort through a public sale in October 2020.

The public sale of Alpenesia held by Gangwon Development Corporation has been conducted through a public competitive bidding process since October 2010. However, the four tenders held from October 2020 to January 2021 failed due to no bidders, and the two private contracts conducted in March and April 2021 also fell through.

Before the fifth tender held thereafter, KH Philux established a special purpose company, KH Gangwon Development, around the end of April 2021 to win the bid, and KH Construction established a special purpose company, KH REITs (now KH Rural Industry), to participate as a cover bidder.

The Fair Trade Commission believes that Chairman Bae led this bid-rigging case by establishing KH Gangwon Development, a paper company under KH Philux, as the successful bidder, and by approving and overseeing all processes and details of the collusion involving the other four companies participating as cover bidders or through equity participation.

The Fair Trade Commission evaluated, "This action is significant as it detected and sanctioned bid-rigging related to the sale of large-scale assets held by a local public enterprise, imposed sanctions on all businesses directly or indirectly involved in the collusion, and applied joint liability for the payment of fines, demonstrating strict measures."