Alleged 560 Billion Won KEPCO Bid-Rigging
Raids on Hyosung Heavy, HD Hyundai Electric, and Others
Prosecutors: "Higher Electricity Rates, Consumer Harm"
At a time when the domestic power equipment industry is enjoying a surge in orders, prosecutors have launched an investigation into allegations of bid-rigging in Korea Electric Power Corporation’s (KEPCO) equipment tenders. Some are criticizing the investigation for failing to fully consider the industry structure, which is characterized by stringent technical requirements. There are also concerns that this could increase uncertainty in a market that had been on a recovery trajectory.
According to legal and power industry sources on October 16, the Fair Trade Investigation Division of the Seoul Central District Prosecutors' Office (headed by Prosecutor Na Heeseok) is reviewing materials seized during a raid the previous day on the offices of six power equipment companies-including Hyosung Heavy Industries, LS Electric, HD Hyundai Electric, and Iljin Electric-as well as one association office. After analyzing the materials, prosecutors plan to summon those involved for questioning and will decide whether to press charges.
This investigation stems from a case reported by the Fair Trade Commission, which imposed a fine of 39.1 billion won and filed a complaint. The companies are suspected of colluding to pre-allocate winning shares in KEPCO’s 560 billion won gas-insulated switchgear tenders between 2015 and 2022, then sequentially winning the contracts. Prosecutors and the Fair Trade Commission believe this collusion led to higher winning bids for the gas-insulated switchgear, resulting in increased electricity rates and subsequent consumer harm.
While the industry has stated it will cooperate fully with the investigation, some have expressed surprise and confusion. Gas-insulated switchgear is a core piece of equipment for cutting off overcurrent at power plants and substations. The high technical barriers mean that only a limited number of companies can manufacture it, but industry insiders argue that the actual likelihood of collusion is low. One official from the power equipment sector said, "To my knowledge, the damages claimed by the Fair Trade Commission and prosecutors do not actually exist." Another source added, "We believed we had sufficiently explained ourselves during the Fair Trade Commission’s investigation, so it was unexpected for the case to proceed to a prosecutorial investigation."
In legal circles, attention is focused on whether prosecutors can conduct a thorough investigation under current circumstances, as the division is in the process of being dissolved. The abolition of the division was confirmed last month following the passage of a government organization restructuring bill by the National Assembly. The prosecution’s indictment authority will be transferred to the newly established Public Prosecution Office, while its investigative powers will move to the Serious Crimes Investigation Office. Coupled with the dispatch of personnel to three major special prosecutors operating externally, the prosecution is reportedly facing manpower shortages for investigations. A lawyer in Seocho-dong with expertise in corporate investigations commented, "Allegations of corporate collusion typically involve a large number of targets, which requires significant manpower. Whether the Fair Trade Investigation Division has sufficient capacity could determine the overall progress of the investigation."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
