The Tainan City Government put improper restriction on the qualifications for bidding firms in tender for the public-own private-operate No. 11 public underground parking lot
Case:
The Tainan City Government put improper restriction on the qualifications for bidding firms in tender for the public-own private-operate No. 11 public underground parking lot
Key Words:
bid tender, scope of business, capitalization
Reference:
Fair Trade Commission Decision of April 12, 2001 (the 492nd Commissioners' Meeting); Disposition (90) Kung Ch'u Tzu No. 062
Industry:
Government Agency (9811)
Relevant Law:
Article 19(ii) of the Fair Trade Law
Summary:
1. The tender by the Tainan City Government for private management of the No. 11 public underground parking lot was the one that the winner of the bid would collect fees from a public parking lot, which was a private activity for the purpose of providing service with market value. In this regard the Tainan City Government would constitute as an enterprise defined by Article 2(1)(iv) of the Fair Trade Law (FTL), and therefore be regulated by the Law. 2. The Tainan City Government's tender provisions restricted the companies participating in the bid to those registered as commissioned parking lot operators and had capital of NT$30 million or above, which constituted as a discriminatory treatment: Article 5 of the "Regulations Governing Private Management of Parking Lots not on Public Owned Roads" passed by the Tainan City Council stated that "Qualifications for participation in bidding for management of public owned off-road parking lots will be set out separately in the general information on bidding procedures." The reason for drafting this provision was that "All persons or companies interested in operating the parking lot may participate in the bid; qualifications for bidders will be announced in the general information on bidding procedures." Thus it was not part of the legislative intention of the Tainan City Council's draft regulations to place any particular restrictions on the qualifications of participating bidders. Point 6 of the Tainan City Government's "General Information on Bidding Procedures" required the following qualifications in bidders: "Two documents to be submitted for inspection: license for parking lot operating company limited by shares issued by the Ministry of Economic Affairs - bidding capital at or above NT$30 million, and with a scope of business permitted under the license that includes commissioned operation of parking lot; registration obtained in this City for operation of a profit-seeking enterprise, with a permitted scope of business that must include commissioned operation of parking lots." However, the Department of Commerce stated that prior to the shift to using coded categories on 1 January 1998 registration was done on the basis of operators' own written statements of the scope of business. If one company registered as "operating parking lots," it could also engage in "commissioned operation of parking lots for others." Taking this case as an example, a company could, according to the needs of its business, choose to apply for registration under "operating parking lots" or "commissioned operation of parking lots for others," or both at the same time. Information from the Department of Commerce also showed that a company that registered "storage and care of automobiles" as a business item could also engaged in business substantially similar to the operation of a parking lot. Therefore, each of the three items of business listed above could be allowed for engaging in parking lot operation. The restriction in the Tainan City's bidding procedures saying that "business registration must be for commissioned operation of parking lot" prevented businesses registered under the other two categories, i.e. "operating parking lots" and "storage and care of automobiles" that could also manage the operation of parking lots under commission, from participating in the bid. It was a form of discriminatory treatment. Further, the restriction setting company capital at or above NT$30 million would prevent other businesses in Tainan City from participating in the bid even if they had registered their businesses under "commissioned operation of parking lots" because they could not able to meet the capital requirement. This was also a form of discriminatory treatment. 3. There was no legitimate reason for the aforesaid discriminatory treatment by the Tainan City Government: While in drafting the "General Information on Bidding Procedures," the Tainan City Government did in fact list the business as "commissioned operation of parking lots" in accordance with the actual situation, in which management by a private source would be commissioned by the City Government. However, at that time companies were registered according to their written statements; therefore even though the stated descriptions of their scope of business were different, they could still be engaged in substantially the same business. The standards to be qualified for the Tainan City tender were of course based on the consideration of various written statements in the company registrations in order to meet the fundamental goal of achieving fair competition. Therefore, since both registrations for "operation of parking lots" and "storage and care of automobiles" could be allowed for management of parking lot operations, and the purpose of the tender was to increase competition to enhance the efficiency of commissioning private operation, there could be no legitimate reason for excluding companies registered under the above two categories from participating in the bid. Further, the bid bond amount was set at NT$5 million, and according to Point 8 of the "General Information on Bidding Procedures", the winning bidders' bid bond could later serve as the security bond, which meant that the amount of the bid bond and security bond were equal. In this bid tender an amount of NT$5 million was deemed sufficient to guarantee against the compensation for possible damage to parking lot facilities. The threshold for required capital was set at NT$30 million, but there had no necessary direct relationship between capital and debt payment capability. If parking lot facilities were considered expensive, the amounts of the bid bond and security bond could have been raised to ensure a sufficient guarantee. The threshold capital level of NT$30 million meant that companies, who lack of capital of that level but could still raise NT$5 million for the bid bond and security bond, would still be unable to participate in the bid, of which was a restriction without legitimate justification. The process of drafting standards for the bidding went through administrative procedures including meetings of various internal departments of the Tainan City Government and with the consent by the Mayor. Nevertheless, the Tainan City Government expressed that the specific figure of NT$30 million was decide upon by the Mayor at a meeting based on the fact that Class A construction companies had to have capital of NT$ 24 million or more, of which it again revealed the lack of a legitimate reason for the discriminatory treatment. This case occurred prior to the enactment of the Government Procurement Law; therefore, the Public Construction Commission stated that the Government Procurement Law was not applicable to this case. However, according to the Public Construction Commission's explanations on business categories of bidding firms and the restriction on capital by the "Standards for Fixing Qualifications of Bidding Firms and Special or Large Capital Purchasing" that was enacted by the delegation of the Government Procurement Law, the aforesaid restrictions set by the Tainan City Government with respect to the registered items of business and capitalization amounts were inappropriate. Such a response could serve as a further reference. 4. The discriminatory treatment by the Tainan City Government was a threat to fair competition: In the local market, which was set up for the operation of the parking lot by Point 6(2) of the General Information on Bidding Procedures that limited to "registrations for profit-seeking businesses obtained in this city," the Tainan City Government stood as the only provider. It therefore had market power, and would therefore have been important to those intending to participate in the bid. In addition, this case would likely have become a standard-setting precedent for later bids on parking lots, and would therefore be influential. According to statement of the Tainan City Government, prior to 6 July 1996 only three companies were registered with capital of NT$30 million or more with a scope of business including "commissioned operation of parking lots." Those firms were Tsuo Chieh (NT$52 million), Yung Ching (NT$60 million), and Wang Ch'un (NT$50 million). This bid obviously excluded other companies with capital lower than NT$30 million and those of the three possible categories of business. Therefore, a discriminatory treatment without legitimate reason by the Tainan City Government threatened to restrict fair competition. 5. The standards for bidding set by the Tainan City Government for the July 1996 bid for commissioning private management of the No. 11 public underground parking lot limited bidder to whose registrations included the business item "commissioned management of parking lot operations" and whose capital were NT$30 million or more. This was a discriminatory treatment without any legitimate cause, and was a threat to fair competition. It thus violated Article 19(ii) of the FTL. The unlawful conduct occurred before 5 February 1999, the date that amendments to the FTL came into effect. Therefore, in accordance with the provisions of the fore part of Article 41 in effect at the time of the unlawful acts, the FTC ordered the Tainan City Government to immediately cease the aforesaid illegitimate and discriminatory treatment. Summarized by Chen, Chun-Ting; Supervised by Cheng, Chia-Ling