"Drawing Lots for Service Areas and Using Sham Bidders"...10 Goyang Cleaning Firms Caught Colluding, Fined 5.264 Billion Won

Ten Companies Including Goyang Miwha Industry Fined
Formed a Cartel After Shift to Competitive Bidding...Preselected Winners by Drawing Lots

Cleaning service providers that colluded to carve up public contracts worth hundreds of billions of won by exploiting the competitive bidding system introduced by local governments to enhance transparency in public services have been caught by the Korea Fair Trade Commission (KFTC). It was revealed that they wasted public funds through elaborate schemes, such as drawing lots to divide service areas and using sham bidders.

On the 12th, the KFTC announced that it had decided to impose corrective orders and a total fine of 5.264 billion won on 10 businesses, including Goyang Miwha Industry and Goyang Sanitation Corporation, for colluding in all 24 bids for the "household waste collection and transportation agency service" ordered by Goyang City in 2020 and 2022.

The case began when Goyang City changed its method for selecting household waste service providers in 2020 from private contracts to competitive bidding. The 10 incumbent companies formed a cartel to avoid losing their established "turf" (assigned service areas) where their personnel and equipment were already deployed.

The representatives of these 10 companies met just before the bid announcement and agreed that two specific companies (Goyang Sanitation Corporation and Cheongan Enterprise) would split the four relatively small areas, while the remaining eight areas would have their winning bidders preselected by drawing lots. In effect, they reverted the competitive bidding system back to a de facto private contracting scheme that was "competitive" in name only.

Their methods were sophisticated. When the preselected winner submitted a bid at a high price that could still pass the qualification screening, the remaining companies acted as decoy bidders by submitting bids higher than the base price.

In particular, the collusion became even more entrenched in the 2022 bids. The 10 companies standardized the winning bid rate at 97.6% of the base amount, and they even prearranged the decoy bidders' bid rates in the range of 98.2% to 98.5%. As a result, in all 24 bids, with a total contract value of 219.5 billion won, the pre-agreed bidders won 100% of the contracts.

The KFTC assessed that this action is meaningful in that it has broken a chronic collusive practice in service sectors where large amounts of public funds are injected, and where contracts were won at high prices, causing waste of public budgets. A KFTC official stated, "We will continue to strengthen monitoring of bid-rigging in public sectors that use taxpayers' money, and will take strict measures against violations of the law when detected."

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