Fair Trade Commission: "Three Companies Including YPENS Colluded in Donam-dong Apartment Repair Construction Bidding...Fines and Prosecution Referral"

Cartel Targeting Residents' Long-Term Repair Reserve Fund in Areas Closely Related to Low-Income Life Uncovered

[Sejong=Asia Economy Reporter Joo Sang-don] Three companies, YPE&S, Mirae BM, and Atech Energy, which colluded in the bidding for repair work at Hanshin Hanjin Apartment in Donam-dong, Seoul, have been sanctioned by the Fair Trade Commission (FTC).

On the 23rd, the FTC announced that it imposed corrective orders and a total fine of 1.782 billion KRW on these three companies and decided to prosecute the three companies and their CEOs to the prosecution.

In apartment repair work bids, the members of the Residents' Representative Meeting, who are the client side, often lack knowledge about the construction and bidding procedures. Before bidding, they receive advice from companies performing related work regarding the construction details and budget, and use this information as a reference for the bidding. Among 52 apartment-related bid collusion cases detected by the FTC since 2018, the companies that advised the Residents' Representative Meeting before bidding induced the bid to be designed in their favor, then participated directly in the bidding while agreeing with other companies on the expected winning bidder, forming a cartel practice. These companies exploited the fact that the Residents' Representative Meeting members are non-experts, mutually recognizing the pre-sales efforts of the advising company before bidding, designating that company as the expected winning bidder, while other companies acted as dummies, engaging in reciprocal collusion.

According to the FTC, the three companies YPE&S, Mirae BM, and Atech Energy, detected this time, participated in the bid conducted by the Residents' Representative Meeting of Hanshin Hanjin Apartment in Donam-dong on February 17, 2017, prearranged the expected winning bidder and dummies, agreed on bidding prices and qualification evaluation factors accordingly, and executed this agreement.

YPE&S, which led the cartel in this case, learned around November 2016 that the apartment was preparing for repair work bids, approached members of the Residents' Representative Meeting, and provided advice on construction details, inducing the bid to be designed in its favor. At that time, YPE&S's energy-saving project performance was 13.3 billion KRW, and the bid participation qualification was restricted to companies that had performed energy-saving projects worth over 13 billion KRW in the past three years or companies that had replaced heating pipes in apartments with over 3,000 households, significantly reducing the number of competitors against YPE&S.

Considering that the apartment bidding regulations require participation of at least three companies for the bid to be valid, YPE&S recruited Mirae BM and Atech Energy as dummies around the bid announcement date of February 17, 2017.

At that time, YPE&S planned to bid 18.76 billion KRW, Atech Energy 19.94 billion KRW, and Mirae BM 22.1 billion KRW, aiming to obtain the highest score in the bidding price indicator and win the bid.

During this process, a YPE&S employee mistakenly wrote the Korean bidding price for Atech Energy as "Geum-i-baeg-i-sip-il-eok-won-jeong" (22.1 billion KRW) instead of "Geum-il-baeg-gu-sip-gu-eok-sa-cheon-man-won-jeong" (19.94 billion KRW). Although this amount was the same as the bid price delivered to Mirae BM, Atech Energy, unaware of the mistake, submitted the bid as is, leaving traces and evidence of collusion.

As agreed by the three companies, YPE&S, which obtained the highest score in the qualification evaluation, was selected as the winning bidder on March 3 of the same year and carried out the apartment repair work and energy-saving project for 18.76 billion KRW.

An FTC official stated, "The actions of these three companies, who prearranged the expected winning bidder and dummies in this bid, agreed on bidding prices and qualification evaluation factors, and executed them, constitute bid collusion." He added, "Due to the collusion by these three companies, the intention of the approximately 15,000 residents of the apartment to determine the contract amount through competitive bidding was nullified, resulting in the long-term repair reserve fund of 18.76 billion KRW, accumulated over about 25 years, being used for repair and energy-saving project costs, causing harm to the residents."

Accordingly, the FTC imposed corrective orders and a total fine of 1.782 billion KRW (provisional) on YPE&S, Mirae BM, and Atech Energy, and decided to prosecute all three companies as well as three individuals including company CEOs and executives to the prosecution.

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