Hsieh Fu-ming et al. submitted collusive bids on a school improvement project in violation of the prohibition against concerted action in Article 14 of the Fair Trade Law.
Case:
Hsieh Fu-ming et al. submitted collusive bids on a school improvement project in violation of the prohibition against concerted action in Article 14 of the Fair Trade Law.
Key Words:
Hsieh Fu-ming, bidding invitation by schools
Reference:
Fair Trade Commission Decision of July 5, 2000 (the 452nd Commissioners' Meeting); Disposition (89) Kung Ch'u Tzu No. 120 and 121
Industry:
Basic Civil Structure Construction (4501)
Relevant Laws:
Article 14 of the Fair Trade Law
Summary:
1. Hsieh Fu-ming is a shareholder in and the manager of Yung Chieh Engineering Industries Ltd. In July 1993, Hsieh became interested in a construction project for improvements to Ta She Elementary School in Hsin Shih Hsiang, Tainan County. After deciding to participate in the bidding of the project in the name of Jung Chun Construction Ltd. (Jung Chun Construction), Hsieh learned that Huang Shih-liang, the responsible person of Ming Yi Construction Co. (Ming Yi Construction) and Yang Hao-lin, responsible person for San Yuan Construction Ltd., (San Yuan Construction) were also interested in the project and had obtained the bidding sheets for the project. Hsieh made phone calls to Huang and Yang on or around 13 July 1993, informing Huang and Yang of his strong willingness in this construction project and demanded that Huang and Yang to set their bidding prices above a specific level so as to allow Hsieh to win the bidding. Hsieh also indicated that he was willing to pay Huang NT$70,000 and Yang NT$6 0,000 for each collaborative bidding. After these consultations, Huang agreed to collude in the bidding. Yang, however, agreed only to refrain from bidding on the project. Hsieh won the contract and then paid Huang and Yang with two checks issued by Hsieh's father, Hsieh A-neng. This agreement among the three parties had the effect of restraining each other's business activities. 2. Analysis of violation of the Fair Trade Law (the Law) in this case (1) Subjects of concerted action San Yuan Construction (Yang), Ming Yi Construction, and Hsieh were enterprises engaging in school-related construction projects and are therefore competing enterprises in the same sector. Although Yang closed San Yuan Engineering on 1 July 1996, he failed to have his company's business registration cancelled by the competent authority. Accordingly, San Yuan Engineering is still subject to the regulation by the Law. (2) Concerted action Although the two disposed parties argued that the payments were merely "profit sharing" or "tips" and not evidence of being "in cahoots," they did not deny that they withdrew from the bidding simultaneously or colluded in the bidding. Moreover, neither Huang nor Yang refused to accept the checks with which Hsieh presented them; instead, they cashed the checks. The Commission was unconvinced by the arguments that the payments were simply "profit sharing" or "tips" and found that the three parties obviously had reached a collusive agreement in advance. (3) Contents of the concerted action On 14 July 1993, Ta She Elementary School made a public invitation to tender bids for the project of building the school's restrooms and improving the school's environment. Hsun Han Construction Engineering Ltd., Ming Yi Construction, and Jung Chun Construction submitted bids accordingly, with Jung Chun Construction being awarded the contract by a bidding price of NT$3.968 million. Although Jung Chun Construction won the bid, the subject of the winning bid was in fact Hsieh, who won the bid by colluding with Ming Yi Construction and San Yuan Construction. Even though San Yuan Construction ultimately did not participate in the bidding and a third party, Hsun Han Construction also submitted a bid, they still do not change the fact that the three competitors, Ming Yi Construction, San Yuan Construction, and Jung Chun Construction, had acted in concert to restrain the number and the value of the bids that were submitted. (4) Purposes of the concerted action Three competitors limited the number of bidders and the amounts of the bids in order to restrain their business activities. 3. Hsieh Fu-ming, Ming Yi Construction, and San Yuan Construction (Yang Hao-lin) agreed to restrain their business activities and bid collusively on the improvement projects to Ta She Elementary School. Since these acts of collusive bidding subverted the bidding mechanism, they are in themselves acts of restraining competition because the bidding mechanism is intended to ensure that public contracts are won through fair, free competition. Consequently, there is no need to consider the question of how these acts of collusive bidding would have affected the market. The competitive bidding mechanism in a given market is affected whenever bidders agree to restrain their business activities. Such restraining acts also accord with the constituent elements of the pre-amended Article 2(1) of the Enforcement Rules of the Fair Trade Law. (Article 5(1) of the amended Enforcement Rules of the Fair Trade Law). Accordingly, the agreement reached by the disposed parties to mutually restrain business activities had met the definition of concerted action under Article 7 of the Law and constituted a violation of Article 14 of the Law. Although the Tainan District Court's 1998 Criminal Judgment Tu Yi Tzu No. 41 is on record, the Commission retained its power to investigate ex officio. The Commission found that the acts constituted a violation of administrative obligations and disposed as is recorded in the main text of the disposition pursuant to the fore part of Article 41 of the pre-amended Law since the amendments to the Law did not take effect until 5 February 1999. Appendix: Hsieh Fu-ming's Uniform Invoice Number: R120764804 Ming Yi Construction Ltd.'s Uniform Invoice Number: 73722172 San Yuan Construction'sUniform Invoice Number: 73722172 Summarized by Hou Vn-Hsien; Supervised by Wu Te-sheng