Despite Collusion Detection, "No Competition, So Not Collusion"... Defeated in Court

A company restricted from participating in government-commissioned bids due to collusion was rejected in its appeal lawsuit.

Court. Photo by Asia Economy DB

According to the legal community on the 9th, the Seoul Administrative Court, Administrative Division 1 (Presiding Judge Kang Dong-hyuk) recently ruled against plaintiff Company A, an X-ray equipment sales company, in a lawsuit filed against the Public Procurement Service head, demanding the cancellation of the bid participation restriction.

In June 2019, Company A participated in a bid commissioned by the Public Procurement Service along with another company, Company B. It was revealed that the two companies had effectively submitted identical proposals, leading to the bid being voided, and the Public Procurement Service requested the Fair Trade Commission to investigate the collusion allegations.

The Fair Trade Commission warned Company A, stating that "they prearranged and executed the decision of the intended winning bidder in advance, committing unfair joint conduct under the Fair Trade Act." The Public Procurement Service also restricted Company A's bid prices for three months under the State Contract Act due to collusion.

Company A filed an appeal lawsuit, challenging the determination of 'collusion.' They argued that under the Fair Trade Act, collusion refers to cases of 'unfairly restricting competition,' but the bid at that time did not fall under this category. The logic was that since no one other than Company B could realistically win the bid, there was no actual competition, and therefore competition was not restricted.

However, the court did not accept this argument, stating, "The 'collusion' under the State Contract Act cannot be seen as requiring the 'competition restriction' under the Fair Trade Act."

The court explained, "Unlike the Fair Trade Act, which prohibits specific types of conduct that unfairly restrict competition, the State Contract Act regards those who collude in competitive bidding to favor a particular person as 'disqualified contractors' and restricts their bid participation. Company A's actions undermine the purpose of the competitive bidding system, cause losses to national finances, and raise concerns about the deterioration of the quality of procured goods, making the conduct highly blameworthy," and judged that the bid participation restriction was not excessive.

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