Hsin Teh T'ai Construction Ltd. and 12 other construction companies committed deceptive acts capable of affecting trading order in violation of the Fair Trade Law by borrowing or lending licenses to participate in bidding on construction contracts in Chiangchun Hsiang, Tainan County

Chinese Taipei


Case:

Hsin Teh T'ai Construction Ltd. and 12 other construction companies committed deceptive acts capable of affecting trading order in violation of the Fair Trade Law by borrowing or lending licenses to participate in bidding on construction contracts in Chiangchun Hsiang, Tainan County

Key Words:

borrowing of licenses, collaborative bidding, illusive competition

Reference:

Fair Trade Commission Decision of June 22, 2000 (the 450th Commissioners' Meeting); Disposition (89) Kung Ch'u Tzu No. 112

Industry:

Road Construction Industry (4502)

Relevant Laws:

Article 24 of the Fair Trade Law

Summary:

1. According to a letter received from the Investigation Bureau's Machinery Task Force for Southern Chinese Taipei, the responsible persons of Hsin Teh T'ai Construction Ltd., Hsin Hsiang Construction Ltd., and Li Hsin Construction Ltd. had engaged in licenses borrowing and collaborative bidding and had won six construction contracts for road improvements on Tainan County Road 24 between Ta T'an Liao and Chia Li Hsing offered by the Chiangchun Hsiang local government between May and June 1996. The companies from whom the licenses were borrowed were:

Yu Ta Construction Ltd., Chu Li Construction Ltd., Pai Li Building Contracting, Ts'ai Yun Construction Engineering Ltd., Shun Mao Construction Ltd., Teh Chi Construction Ltd., Fu Hai Construction Ltd., Jen Construction Ltd., Chen Hsiung Construction Ltd., Hsin Yuan Construction Ltd.

The contracts were won by Hsin Teh T'ai Construction, Hsin Hsiang Construction, and Li Hsin Construction. These acts of license borrowing and collusive bidding had violated the Fair Trade Law.

2. After investigation, it is the finding of the Fair Trade Commission (the Commission) that Lin Hsin-sung (responsible person Hsin Teh T'ai Construction), Chang Shu-mei (responsible person Hsin Hsiang Construction), Liang Yao-chang (de facto responsible person Li Hsin Construction) submitted their bids on behalf of Hsin Teh T'ai Construction, Hsin Hsiang Construction, and Li Hsin Construction. Lin, Chang, and Liang had collusively agreed to have Hsin Teh T'ai Construction win contract 1+976-2+336, Hsin Hsiang Construction contracts 1+176-1+576 and 4+195-4+745, and contracts 0+876-1+176, 1+576-1+976, and 4+745-5+165 for Li Hsin Construction. All six contracts were for road improvements on Tainan County Road 24 between Ta T'an Liao and Chia Li Hsing. Yu Ta Construction Ltd., Pai Li Building Contracting, Chu Li Construction Ltd., Ts'ai Yun Construction Engineering Ltd., Shun Mao Construction Ltd., Teh Chi Construction Ltd., Fu Hai Construction Ltd., Jen Construction Ltd., Chen Hsiung Construction Ltd. , and Hsin Yuan Construction Ltd., having no real interest in bidding for these contracts, submitted bids out of the consideration of their friendly relationships with Hsin Teh T'ai Construction, Lin Hsiang Construction, and Li Hsin Construction. Moreover, Lin, Chang, and Liang had furnished their bidding securities. The Commission also noted that since Hsin Teh T'ai Construction filed an application on 24 August 1998 to the Taiwan Province Department of Reconstruction for approval of dissolution registration, and was thereafter approved. Hsin Teh T'ai Construction as a legal person is thereby abolished and should therefore not be disposed of.

3. Hsin Hsiang Construction, Li Hsin Construction, Yu Ta Construction, Pai Li, Chu Li Construction, Ts'ai Yun Construction Engineering, Shun Mao Construction, Teh Chi Construction, Fu Hai Construction, Jen Construction, Chen Hsiung Construction, and Hsin Yuan Construction had engaged in borrowing and lending licenses to submit bids for government contracts. They generate illusively the belief that competition does exist among the 12 construction companies and concealed the key fact that less than three companies were bidding on the contracts. This had also misled the agency offering the contracts into believing that the winners had won fairly the bidding and awarding them the contracts accordingly. The offering agency thus lost the opportunity to award the contracts at a lower price after a new round of bidding, the ethic of business competition suffered, and the functioning of the market pricing mechanism was hampered. This constituted a violation of Article 24 of the Fair Trade Law, which prohibit s "deceptive ... acts that are capable of affecting trading order." Since the illegal acts in this case occurred before the amendments to the Fair Trade Law took effect on 5 February 1999, the Commission disposed in accordance with the fore part of Article 41 of the pre-amended Fair Trade Law.

Appendix:

Hsin Hsiang Construction Ltd.'s Uniform Invoice Number: 74714376

Li Hsin Construction Ltd.'s Uniform Invoice Number: 84836834

Pai Li Building Contracting's Uniform Invoice Number: 06652210

Yu Ta Construction Ltd.'s Uniform Invoice Number: 23794592

Chu Li Construction Ltd. 's Uniform Invoice Number: 86206712

Ts'ai Yun Construction Engineering Ltd.'s Uniform Invoice Number: 84525888

Shun Mao Construction Ltd.'s Uniform Invoice Number: 84681212

Teh Chi Construction Ltd.'s Uniform Invoice Number: 84985881

Fu Hai Construction Ltd.'s Uniform Invoice Number: 89901263

Jen Construction Ltd.'s Uniform Invoice Number: 84154112

Chen Hsiung Construction Ltd.'s Uniform Invoice Number: 86780928

Hsin Yuan Construction Ltd.'s Uniform Invoice Number: 23981814

Summarized by Yeh Tien Fu;

Supervised by Shih Gin Tsun


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