Public Procurement Service and LH Detect Bid Rigging by 17 Companies in 667 Billion KRW Concrete Pile Tender... Fines Total 47.27 Billion KRW

Sanctions on Bid Rigging for Concrete Pile Work in Apartments and Others
Fair Trade Commission: "Collusion Incentives Increased Due to COVID-19... Strengthening Monitoring Activities"

Data provided by the Korea Fair Trade Commission

[Asia Economy Reporter Moon Chaeseok] Dongjin Industry and 16 other businesses, along with the Korea Centrifugal Concrete Industry Cooperative, were caught colluding in a public procurement bid for concrete piles worth 667 billion KRW (1,768 cases) conducted by the Public Procurement Service and Korea Land and Housing Corporation (LH). The Fair Trade Commission (FTC) announced that it will strengthen monitoring activities as the spread of COVID-19 has increased incentives for businesses to collude.

On the 30th, the FTC stated that from April 2010 to May 2016, these 17 businesses colluded regarding the expected winning bidders, dummy bidders, and bid prices, and carried out the collusion. The FTC decided to impose corrective orders and fines totaling 47.269 billion KRW. The colluded product, concrete piles (PHC piles), are construction materials made by placing rebar, aggregates (such as sand and gravel), and cement into long cylinders and using centrifugal force generated by high-speed rotation. Since these are components used in the foundation work of buildings such as apartments and stations, they are mainly used by LH and the Korea Railroad Corporation.

The businesses formed regional groups in the metropolitan area, Honam region, Yeongnam region, etc., and held regular meetings or phone contacts once a week to prearrange the expected winning bidders, dummy bidders, and bidding participation methods (individual, joint supply, cooperative) for all bids announced by public institutions. The expected winning bidder was chosen as the company closest to the delivery site, and both the expected winning bidders and dummy bidders were basically businesses within the same region. If businesses from other regions wished to participate, they were allowed to join as well.

For large-scale bids with too much delivery volume to be concentrated on a single company, the businesses colluded in advance to form joint supply groups to participate in the bids or involved the concrete cooperative, then divided the winning quantities among themselves. The expected winning bidder set the bid price and informed the dummy bidders, who then submitted higher prices to help the expected winning bidder win the bid as agreed. Using these methods, the colluding companies won all 1,768 bids. The average winning rate was as high as 98.26%.

The FTC judged that the collusion was planned after the revision of the "Act on the Operation of Public Institutions" in April 2010, which allowed concrete piles to be purchased only through bids involving small and medium-sized enterprises. These 17 businesses colluded for over six years, selling concrete piles to public institutions at prices higher than those in the general market, thereby obtaining unfair profits. As a result, the average operating profit margin of these 17 businesses from 2010 to 2016 was 9.7%, more than three times higher than the 3% average operating profit margin in 2017-2018 when there was no collusion.

Lee Jungwon, head of the Cartel Investigation Division at the FTC, said, "This action is significant in that it uncovered long-term secret collusion in public procurement bids for concrete piles used in the foundation work of buildings such as apartments, recovering unfair profits that businesses obtained through collusion in markets funded by national budgets." He added, "The FTC will continue to monitor collusion in sectors closely related to the public’s life and safety, and especially considering that the spread of COVID-19 may increase incentives for businesses with reduced profitability to collude, we plan to strengthen our monitoring activities."

This content was produced with the assistance of AI translation services.