Ministry of Land, Infrastructure and Transport Requests Police Investigation into 13 Companies Suspected of Swarm Bidding on Public Land

If Prosecutors Indict, Contract Cancellation and Land Reclamation

The Ministry of Land, Infrastructure and Transport announced on the 11th that it has identified 13 companies suspected of swarm bidding on public land and has requested a police investigation.

Ministry of Land, Infrastructure and Transport, Government Sejong Complex / Photo by Asia Economy DB

This follows the first on-site inspection of 10 suspected swarm bidding companies in September last year and a joint on-site inspection conducted by the Ministry of Land, local governments, and Korea Land & Housing Corporation (LH) on the remaining 71 suspected companies until February this year. Swarm bidding refers to a practice where a parent company and multiple disguised affiliates participate in a bid simultaneously to increase the chances of winning.

Earlier, the Ministry of Land announced a "Swarm Bidding Eradication Plan" and checked whether a total of 101 companies and 133 land parcels that received public land through a lottery from LH in the past three years used the same internet protocol (IP) address to participate in applications and whether they directly executed land contracts. As a result, signs of swarm bidding, including ineligible construction companies such as paper companies, were confirmed in 81 companies and 111 land parcels. Subsequently, to verify whether the suspected companies were disqualified from participating in applications, the Ministry focused on checking compliance with the construction business registration standards under the Framework Act on the Construction Industry and the housing construction business registration standards under the Housing Act.

Ultimately, 19 companies suspected of legal violations were identified, and the Ministry of Land requested administrative action from local governments last month. Of these, 13 companies, excluding 6 with relatively minor violations, were also referred to the police for investigation. Among them, 6 were related parent companies or management firms, and the public land parcels won totaled 17.

Regarding the violations, 13 companies failed to meet office requirements for application eligibility, and 10 companies (with overlap) failed to meet the required number of technical personnel. For example, one company did not operate the registered office on paper but worked at the parent company's office in another building. The number of technical personnel was insufficient as the CEO also served as a manager at the parent company, and one technical staff member worked as the CEO of another affiliate, violating the obligation of full-time employment.

The Ministry of Land plans to cancel contracts and reclaim land if the prosecution indicts the companies for violating related laws following the police investigation. Violations of the criminal law's obstruction of business offense can result in imprisonment of up to five years or a fine of up to 15 million won. Violations of the prohibition on lending construction business registration certificates under the Framework Act on the Construction Industry can lead to imprisonment of up to five years or a fine of up to 50 million won. Additionally, if there is a history of administrative sanctions such as business suspension, participation in first-priority applications for public land will be restricted for three years.

Minister of Land Won Hee-ryong said, "We will pursue suspected violating companies to the ends of the earth to establish fair order in the public land market," adding, "We are improving the system so that local governments verify whether winning companies are paper companies before contracts for future public land supplies, not only to eliminate paper companies and correct unfair bidding practices where some construction companies mobilize affiliates."

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