Judgment
in criminal case against P'eng Kuo Ch'uan Companies for violation of Fair
Trade Law
Chinese
Taipei
Case:
Judgment in criminal case against
P'eng Kuo Ch'uan Companies for violation of Fair Trade Law
Key Words:
borrowing licenses, collusive
bidding, purchasing and tender offers
Reference:
Taipei District Court Criminal
Judgment (88) Yi Tzu No. 2934
Industry:
Processed Paper Manufacturing industry
(1830)
Relevant Laws:
Articles 14,
24, and
41 of
the Fair Trade Law
Summary:
- The pleading in brief was:
(１) Beginning on August 1993, Peng Kuo-ch'uan ,the responsible person of Li
Kuo Co., Ltd. (" Li Kuo Co"), P'eng Huang-yeh, the responsible person
of Ye Ch'uan Li Paper Ltd. ("Ch'uan Li Co"), Hsieh Po-fu, the responsible
person of Yi Ling Industries Co., Ltd. ("Yi Ling Industries"), Ch'en
Ching-hui, the responsible person of Cheng Lung Industries Ltd. ("Cheng
Lung Industries"), and Chuang Hsin-ming, the responsible person of the
Ho Ch'ing Advanced Packaging Co., Ltd. ("Ho Ch'ing Co.") colluded
to subvert bidding on the procurement contracts offered by the Taiwan Tobacco
and Wine Bureau. When other manufacturers attempted to submit bids, the aforementioned
companies intentionally left the amount of their bids blank to prevent the
statutory number of bidders from being reached. This criminal act was committed
in full knowledge of the illegality of concerted action and with joint criminal
intent. As a result, Li Kuo Co. won five successive contracts worth a total
of NT$110,321,000 to supply the Taiwan Tobacco and Wine Bureau with white
printing paper. The Fair Trade Commission (the "Commission") found
this act detrimental to competition on the market and in violation of the
prohibition against concerted action in Article 14 of the Fair Trade Law and,
pursuant thereto, in violation of Article 35 of the same Law.
(２) Questioned during the Ministry of Justice investigation, P'eng Kuo-ch'uan
admitted that P'eng Huang-yeh, the responsible person of Ch'uan Li Co, had
borrowed money for the bid bonds placed by Ch'uan Li Co. and Yi Ling Co. in
the first tendering and that Hsieh Po-fu, Yi Ling Co,'s responsible person
had borrowed funds for Yi Ling Co.'s bid bonds.
(３) Questioned during the Ministry of Justice investigation, Chuang Hsin-min
stated that Ch'ing Ho Inc., operated by Ch'en Ming-ch'i, had not actually
attempted to secure Taiwan Tobacco and Wine Bureau paper procurement contracts
but had "lent" Ch'ing Ho Inc. to P'eng Kuo-ch'uan's Li Kuo Co. for
the bid.
(４) P'eng Kuo-ch'uan's Kuo Li Co. and P'eng's wife Yeh Yueh-li provided the
funds for bid bonds to the companies of the other defendants in response to
subsequent invitations to tender by the Tobacco and Wine Bureau.
(５) The defendants claimed that there isn't any agreement on collaborating
with the concerted bidding, because the competition actually exits among them.
However, this claim is not very supportive then given the facts of "lending
actions" of company licenses and bid funds to competitors. The concerted
actions are thus involved in this bidding and tendering.
- The defendants strenuously denied
the charges. Their defenses, in brief, were as follows:
(１) The defendants participated in the bidding at Li Kuo Co,'s request because
of their business and personal ties. They offered bids simply to avoid delays
in the tendering process due to the fact that the statutory number of bidders
had not been reached. Because Ho Ch'ing Co., Cheng Lung Co., Yi Lung Co.,
and Ch'uan Li Co. were not competitors, they could not have violated the prohibition
on concerted action in Article 14 of the Fair Trade Law.
(２) The defendants did not agree on prices, nor did they enter any agreement
to divide profits. Consequently, they did not engage in concerted action.
(３) The procurement process was an open tender. All qualified suppliers could
participate and submit bids. The defendants had no way of preventing other
companies from submitting bids and thereby monopolizing the bidding process
or obstructing market competition.
(４) The Tobacco and Wine Bureau adheres to the regulations governing domestic
procurement. If an incomplete bid is submitted these regulations clearly stipulate
that the bid is invalid. While the Tobacco and Wine Bureau did declare the
bidding on one of the procurement contracts for which the defendants bid invalid
due to the amount of the bid was left blank, this was not collusion to ensure
that Li Kuo Co. would win the bid, but rather a simple and accidental oversight
by the defendants.
(５) The Commission notes that Article 35 of the Fair Trade Law has been amended
and thus the defendants are not subject to fines for their acts. Ch'en Ching-hui,
who was subpoenaed to appear before the court but failed to appear before
the court to give a legitimate reason for his failure to appear, did not make
a defense or present any testimony.
- Judgment of the Court
(１) In its letter of response to the Taipei District Court, the Commission
stated, in brief, that:
(i)Without direct evidences, it was impossible to prove the charges against
Li Kuo Co. et al. conclusively.
(ii) In the Commission's (88) Kong Chu Tzu Disposition No. 068 submitted on
25
June 1999, the Commission subsequently found that there was no clear evidence
for the charges against the defendants.
(iii) In sum, the Fair Trade Commission, the competent authority for the Fair
Trade Law, took no action against the defendants under Article 41 of the Fair
Trade Law. Consequently, the threshold requirement in Article 35 of the same
Law was not met and the defendants should be notified of their innocence.
(２) The Court also found that:
(i)The defendants admitted that "Peng Kuo-ch'uan bid for Tobacco and
Wine Bureau procurement contracts using the names of the Ch'uan Li, Yi Ling,
Cheng Lung, and Ho Ch'ing companies. Peng did so to increase the numbers of
companies that submit bids because the Tobacco and Wine Bureau would otherwise
have postponed the awarding of the contract." The other defendants agreed
to submit bid and lend out their licenses on the basis of their "friendship"
with Li Kuo Inc.
(ii)The Fair Trade Commission also determined that the defendants borrowed
and lent licenses in the aforementioned disposition.
(iii)The defendants admitted that "other than Li Kuo Co., the other companies
did not engage in the processing or trading of white printing paper. This
is why the other four companies and Li Kuo Co. are not competitors."
This statement shows that Kuo Li et al. borrowed and lent licenses and that
Ho Ch'ing, Cheng Lung Co., Yi Ling Co., and Ch'uan Li Co. participated in
the bidding in name only. There was in fact no real price competition. Otherwise,
they would have had no reason to lend out their licenses.
(iv)The borrowing and lending of licenses by the defendants constituted joint
criminal intent and a division of responsibilities calculated to affect the
bids and represented a common effort to make Li Kuo Co.'s bid the winning
bid. This is the only possible context in which the borrowing of the licenses
could become meaningful. Otherwise, Li Kuo Co. would have had no reason to
borrow the licenses. The defendants were also suspected of having violated
Article 87(4) of the Government Procurement Law.
(3)However:
(i) The legislative intent of the Fair Trade Law is the maintenance of the
trading order and the interests of consumers so as to secure fair competition
and encourage economic stability and prosperity. This intent is clearly specified
in Article 1 of the Fair Trade Law.
The legal interests protected by the Government Procurement Law, however,
is the establishment of an fair, transparent, and efficient government procurement
system as is clearly specified in Article 1 of the Government Procurement
Law. These are different legal interests from those of the Fair Trade Law.
(ii) Given that the defendants are innocent of the charges brought against
them under the Fair Trade Law, there is no issue of an imaginative joinder
of offenses (idealkonkurreaz) with respect to the violation of the Government
Procurement Law. Since the defendants were not indicted for violations of
the Government Procurement Law, this Court will not hear arguments in this
connection. This is hereby noted.
Appendix:
Li Kuo Co., Ltd.'s Uniform Invoice No.: 47112688
Ye Ch'uan Li Paper Ltd.'s Uniform Invoice No.: 22472968
Yi Ling Industries Co., Ltd.'s Uniform Invoice No.: 47029226
Cheng Lung Industries Ltd.'s Uniform Invoice No.: 03143919
Ho Ch'ing Advanced Packaging Co., Ltd.'s Uniform Invoice No.: 46184261
Summarized by Ch'iu Shu-fen
Supervised by Hsu Chao-ying
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