Tso Chieh Parking Garage Co., Ltd. created the illusion of competition in the bidding of the No. 11 Underground Public Parking Garage in Tainan City for private operation
Case:
Tso Chieh Parking Garage Co., Ltd. created the illusion of competition in the bidding of the No. 11 Underground Public Parking Garage in Tainan City for private operation
Key Words:
bidding, abrogation of bidding
Reference:
Fair Trade Commission Decision of April 12, 2001 (the 492nd Commissioners' Meeting); Disposition (90) Kung Ch'u Tzu No. 061
Industry:
Parking Garage Industry (9640)
Relevant Law:
Article 24 of the Fair Trade Law
Summary:
1. A letter from the Tainan City Investigation Unit of the Bureau of Investigation, Ministry of Justice, stated as follows: Upon completeness of construction of the No. 11 Underground Public Parking Garage in Tainan City, the garage was to be released for private operation. This news was published in the newspapers and magazines. Chen Ching-chang (Chen) invited friends to establish three companies, Tso Chieh Parking Garage Co., Ltd., Wang Chun Parking Garage Co., Ltd., and Yung Ching Parking Garage Co., Ltd. in order to meet the requirement of three companies to participate in the bidding for the construction contract of the garages. In addition, to prevent other companies from participating the bidding, Chen and his friends colluded with the person in charge of the bidding in the Tainan City Government to specify "commissioned operation of parking garage business" as the business item of the bidding companies in the bidding guidelines. They also intentionally delayed public announcement of the qualification requirement until one week before the bidding. As a result, other parking garage operators who wanted to participate in the bidding were unable to do so because they had insufficient time to change their business item to meet the qualification requirement before the bidding on 6 July 1996. Only those three companies established by Chen and his friends participated in the bidding and, among them, Tso Chieh Parking Garage Co., Ltd. won the bidding as planned. Hence it was alleged that this conduct of Chen and his friends violated the Fair Trade Law (FTL). 2. Findings by the Fair Trade Commission are as follows: The three companies participated in the bidding were established respectively by Chen's friends Liu Wen-chung, Lu Ching-shuan, and Chang Kung-yi, at Chen's request. The NT$60 million in funds required for the establishment of the three companies had been assembled from Chang Kung-yi. Chen deposited the funds into an account of each company for incorporation verification, and then returned the funds. Those funds also served as the NT$5 million bid bond for the Wang Chun Parking Garage and Yung Ching Parking Garage. While Chen was not the responsible person for the three companies, he had carried out the incorporation, located the business sites, and amended the articles of incorporation from the operation of parking garage business to the commissioned operation of parking garage business. Chen had suggested the contribution ratio filled-in in the bidding documents. Even if the responsible persons of the three companies did not know one another, given that Chen had invited his friends to establish the companies, carried out the actual work related to participation in the bidding, and suggested the contribution ratio filled-in in the bidding documents, it is evident that there was no actual competition among the three companies. 3. Grounds for Disposition Lu Ching-hsuan and Chang Kung-yi, the responsible persons respectively of Wang Chun Parking Garage and Yung Ching Parking Garage, and Chen, entrusted to give a statement before the Commission by Tso Chieh Parking Garage, claimed as follows: The responsible persons of these companies were unaware before the bidding that Chen had invited friends to separately establish two other companies for the purposes of participation in the bidding. Note however the following as regards the operation of companies limited by shares: the registration of incorporation and the amendment of articles of incorporation must be applied for by a majority of the directors and at least one supervisor and must be decided by a resolution of the shareholders; the business must be conducted by decision of the directors; the president of the board chairs the shareholder' and directors' meetings internally and represents the company externally; and the shareholders must carry out their obligations of providing capitals. The three companies assembled NT$60 million from Chang Kung-yi for company capital verification. The registration of their incorporation, the amendment of their articles of incorporation from the operation of parking garage business to the commissioned operation of parking garage business, and the searches for their business locations had all been carried out by Chen. As stated above, the three companies possessed the qualification of a legal person, and their representatives were not the same. However, their representatives, directors, and shareholders did not actually exercise control over the companies and had not participated in the bidding. The intentions they expressed and the consensus they formed were the same. Hence the function of each company's participation in the bidding was not to compete in the bidding but was merely to assemble a sufficient number of participating companies required by the bidding so as to avoid abrogation of the bidding. Even if the representatives of the three companies were unaware that Chen had invited his friends to separately establish two other companies to participate in the bidding, it cannot be said that they were not negligent. Their participation in the bidding caused the bid organizer to mistakenly believe that competition existed, and confused the bid organizer's judgment regarding the market conditions, thus enabled them to obtain a trading opportunity. In addition, as the minimum number of participating companies was met in the bidding, there was no need for abrogation of the bidding, which would have necessitated that another bidding or price negotiation be undertaken. Hence competitors lost the opportunity to participate in fair competitive trading. Such conduct is condemnable in terms of business ethics, and constitutes a deceptive and unfair conduct sufficiently to have an adverse effect on the trading order. The conduct of Chen and his friends violated the provisions of Article 24 of the FTL. Even if the Tainan City Government had been aware of the use of borrowed licenses in the participation in bidding, the three companies violated the principle of efficient competition causing competitors who compete fairly to lose trading opportunities. Hence the conduct of Chen and his friends was clearly unfair and was likely to impact the trading order, thus was in violation of the provisions of the FTL. As the unlawful conduct took place before the amendment of the FTL on 5 February 1999, the disposition rendered was pursuant to the provisions of Article 41 of the same Law. 4. Wang Chun Parking Garage and Yung Ching Parking Garage were not disposed because they did not win the bidding, and they were dissolved in 1997 and ceased to exist. Although Chen's conduct was condemnable in terms of business ethics, Chen did not constitute an "enterprise" under Article 2(1)(iv) of the FTL. Appendix: Tso Chieh Parking Garage Co., Ltd.'s Uniform Invoice Number: 96883515 Summarized by Chen, Chun-Ting; Supervised by Cheng, Chia-Ling