Perspective view of Dongtan 2 New City Jeil Punggyeongchae Edu & Park (Provided by Jeil Construction)
Jeil Construction was sanctioned by the Fair Trade Commission for unfairly supporting affiliates owned by the controlling family by securing public land for apartment construction through so-called 'swarm bidding' and then transferring construction work to those affiliates.
On the 30th, the Fair Trade Commission announced that it decided to impose corrective orders and a fine of 9.7 billion KRW on Jeil Construction for providing a substantial amount of construction work to its affiliates, JJ Construction and JI Construction, owned by the controlling family, while building apartments on public land.
Jeil Construction is a Gwangju-based construction company specializing in the sale and construction of apartments on public land, operating a business that builds apartments under the brand name 'Punggyeongchae' on public land secured through so-called 'swarm bidding' and other methods.
Jeil Construction was the only construction company within the group with the credit rating and construction capability to independently carry out apartment construction projects, effectively monopolizing the construction rights for public land development projects secured at the group level.
On the other hand, JJ Construction and JI Construction only received subcontracting work from Jeil Construction or small-scale public contracts, lacking any construction capability to perform apartment construction work.
The Korea Land and Housing Corporation decides the recipients of public land supply by conducting a lottery among companies that meet the first-priority subscription qualifications. Since August 2016, the first-priority subscription qualifications have been strengthened to require 'housing construction performance of 300 units or more in the past three years.'
Jeil Construction selected JJ Construction or JI Construction as joint contractors in a total of seven public land development projects where it secured construction rights, signing joint contracts and providing a substantial amount of construction work so that JJ Construction and JI Construction could secure construction performance and increase profitability.
Through this support, JJ Construction and JI Construction secured significant profits and greatly strengthened their positions in the residential building construction market. During the violation period, JJ Construction achieved construction sales of 157.4 billion KRW and construction profits of 13.8 billion KRW, while JI Construction recorded construction sales of 84.8 billion KRW and construction profits of 10.7 billion KRW.
The construction sales obtained through the violation accounted for approximately 83.3% and 49.3% of the total construction sales for JJ Construction and JI Construction, respectively, and also accounted for 20.9% and 12.8% of their total sales. Additionally, their construction capability evaluation rankings improved significantly: JJ Construction rose from 1,337th in 2016 to 205th in 2020, and JI Construction climbed from 546th in 2017 to 405th in 2023.
By securing a substantial amount of construction performance through this support, JJ Construction and JI Construction hindered fair competition in the public land supply market. They were able to easily meet the first-priority subscription qualification of constructing 300 housing units over three years and actually won public land lotteries.
The Fair Trade Commission stated, "This action is a case of sanctioning unfair support where a controlling family provided excessive economic benefits by allocating a substantial amount of apartment construction work to affiliates owned by the controlling family without reasonable grounds." It added, "It is significant that unfair support was detected in a mid-sized business group, which is outside the scope of regulations such as controlling family private benefit restrictions and large business group regulations, thus representing a blind spot in market oversight."
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