San Chiang Construction, Hsin Chi Construction and others allegedly violated the Fair Trade Law by manipulating the bidding for a construction project in Lin Nei Hsiang, Yunlin County through the lending and borrowing of construction licenses
Case:
San Chiang Construction, Hsin Chi Construction and others allegedly violated the Fair Trade Law by manipulating the bidding for a construction project in Lin Nei Hsiang, Yunlin County through the lending and borrowing of construction licenses
Key Words:
general construction contracting, obviously unfair practice
Reference:
Fair Trade Commission Decision of March 8, 2001 (the 478th Commissioners' Meeting); Disposition (90) Kung Ch'u Tzu No. 047
Industry:
General Civil Engineering Construction Industry (4501)
Relevant Law:
Article 24 of the Fair Trade Law
Summary:
1. This case was referred by the Ministry of Justice Investigation Bureau's Yunlin County Branch Office. It was alleged that San Chiang Construction Co. ("San Chiang"), Hsin Chi Construction Co. ("Hsin Chi"), Chuan Sheng Construction Co. ("Chuan Sheng"), Sheng Chia Construction Co. ("Sheng Chia") and Hsiang Lin Construction and Engineering Co. ("Hsiang Lin") violated the Fair Trade Law by borrowing and/or lending licenses to participate in bidding for the Lin Nei Hsiang Village Office's Construction Project No. 17 in Yunlin County. 2. Findings: San Chiang borrowed licenses from Chuan Sheng and Hsiang Lin and paid the bid bond for the project. Chuan Sheng has lent San Chiang its licenses on eight occasions. On one occasion the bid was won under Chuan Sheng's name, but San Chiang performed all actual work for the project. Chuan Sheng has confirmed that it willfully lent its license to San Chiang and assisted in the payment of bid bonds to bid on projects. On the occasion it won the bid, Chuan Sheng also cooperated with San Chiang in signing contracts and settling accounts with the Lin Nei Hsiang Village offices. Hsiang Lin is a Class "A" construction company. Hsiang Lin has not denied lending its licenses to lower ranked construction firms to bid for projects. Of 15 projects Lin Nei Hsiang has accepted bids on, Hsiang Lin has lent its license to allied companies on 11 occasions. An "A" class construction company, Hsiang Lin and other companies yet to face disciplinary action, lent their licenses to mostly "B" and "C" class const ruction companies to bid for public construction projects. Hsiang Lin was well aware of and well acquainted with regulations regarding government procurement and clearly understood its culpability in compromising business competition ethics and principles of efficient competition through the lending of its license to allow other companies to bid on public projects. Despite that awareness, Hsiang Lin did not cease such practices and in fact continued to lend other companies its license, consequently damaging the effectiveness of market mechanisms as the essence of fair play in the competitive bidding for public projects. Sheng Chia initially had no intention of bidding on the project but agreed to go along with Chuan Sheng's plan to file bogus bids for the project following a telephone conversation. Sheng Chia, at the behest of Chuan Sheng, submitted the bid application and paid the bid bond with funds supplied by Chuan Sheng. Chuan Sheng repeated the process with several other companies and Sheng Chia won the bid. Sheng Chia then handed the project over to Ch uan Sheng and set up a separate bank account to facilitate Chuan Sheng's settlement of the account with the Lin Nei Hsiang Village offices. Sheng Chia claimed that it did not profit from the scheme. The Ministry of Justice Investigation Bureau stated that the four percent fee the company received for lending its license was used to cover taxes and other assessments. The Fair Trade Commission, however, ruled that the company improperly profited through being falsely credited with having completed the project. 3. With regard to this case, in 1999 the Taiwan Yunlin District Court ruled in judgment No. 346 that the heads of organizations bidding for the project in question did willfully collude to avoid the public bidding process, assigning the bid through use of false pricing or price fixing. As a result, participating bidders were not in actual competition with one another, a fact of which they were all aware. The lending of licenses allowed the bidders to deceive the agency conducting the bidding and created a false impression of the existence of open competition for the project, violating provisions against "deceptive practices" in Article 24 of the Fair Trade Law. The offenders in this case also violated provisions in the same article of the law prohibiting violations of the principles of effective competition and harming those competing companies who do abide by the law in their bidding practices, thus constituting an "obviously unfair" act. Appendix: San Chiang Construction's Uniform Invoice Number: 86939862 Hsin Chi Construction's Uniform Invoice Number: 84541233 Chuan Sheng Construction's Uniform Invoice Number: 84891940 Hsiang Lin Construction and Engineering's Uniform Invoice Number: 23199094 Sheng Chia Construction's Uniform Invoice Number: 97394319 Summarized by Hou, Vh-Hsien; Supervised by Wu, Te-Sheng