Hon Yang Construction & Land Development Co., Ltd., Full-Yuan Development Enterprise Co., Ltd., and Wei Ku Enterprise Co. Ltd. in Taiwan Sugar Corporation's open tender for the T'ung Hsin Chia Yuan joint housing construction project at its Huwei plant location in violation of the Fair Trade Law
Case:
Hon Yang Construction & Land Development Co., Ltd., Full-Yuan Development Enterprise Co., Ltd., and Wei Ku Enterprise Co. Ltd. in Taiwan Sugar Corporation's open tender for the T'ung Hsin Chia Yuan joint housing construction project at its Huwei plant location in violation of the Fair Trade Law
Key Words:
open tender, borrowing and lending of licenses
Reference:
Fair Trade Commission Decision of December 6, 2001 (the 526th Commissioners' Meeting); Disposition (90) Kung Ch'u Tzu No. 202
Industry:
Housing Construction Industry (3901)
Relevant Law:
Article 24 of the Fair Trade Law
Summary:
1. A letter from the Central Mobile Task Force of the Ministry of Justice Investigation Bureau stated: In the open tender held on 24 March 2000 at Taiwan Sugar Corporation's main Huwei plant for the "Tung Hsin Chia Yuan joint housing construction project," participating firms included Hon Yang Construction & Land Development Co., Ltd. (Hon Yang Corporation), Full-Yuan Development Enterprise Co., Ltd. (Full-Yuan Corporation), and Wei Ku Enterprise Co. Ltd. (Wei Ku Corporation). The contract was awarded to Full-Yuan Corporation. Investigation shows that money for the bid bonds of all three companies, Hon Yang Corporation, Full-Yuan Corporation, and Wei Ku Corporation, was provided by the responsible person of Hon Yang Corporation, Liao Yu-hui, and his friends Cheng Jung-nan and Wang Hsiu-ying. Further, in light of the close similarity of the content of the bid documents submitted, including the "Proposal for Joint Construction Housing Project in Huwei Village" and "Cooperative Venture Agreement," which suggests they were copied from each other, there is sufficient evidence indicating collusion in the bidding process between the three companies.2. Inquiries with Taiwan Sugar Corporation revealed that it provided the land for the cooperative construction venture involving public and private groups. After completion of the housing, the enterprise awarded the bid then contracted to buy the total share of the real estate that had been apportioned to Taiwan Sugar Corporation. The Public Construction Commission expressed the view that "The provision of land by the Taiwan Sugar Corporation for real estate investment and development was done according to a model in which a cooperative construction project is undertaken along with publicly and privately operated enterprises, with the object of sale of the completed commodity. If the firm that is awarded the bid ultimately buys the entire share of real estate acquired by Taiwan Sugar Corporation, it is equivalent to sale of the same by Taiwan Sugar Corporation, and the Government Procurement Law is not applicable." The open tender in this case occurred after implementation of the Government Procurement Law, and included both construction to specifications and buying and selling of real estate. However, the Fair Trade Commission's (FTC) investigation showed that the goal of the open tender process was in fact the sale of land, with housing construction only intended to enhance the sale value of that land, and since the sale of assets is not regulated by the Government Procurement Law, the conduct of the companies involved in this case should be subject to the disposition of the FTC in accordance with the Fair Trade Law. During investigation by the FTC, Liao Yu-hui of Hon Yang Corporation admitted having borrowed the licenses of Full-Yuan Corporation and Wei Ku Corporation; likewise, those two companies admitted they had done the lending.3. The FTC's investigation showed that not only did Liao Yu-hui participate in tendering bids under the name of Hon Yang Corporation, he also submitted bids through Full-Yuan Corporation and Wei Ku Corporation by means of borrowing the licenses of those companies. The companies who allowed their licenses to be used expressed that they had done so out of friendship, and that the substantive issues (the bid bond and the respective bid prices they submitted) had been decided by Liao Yu-hui without consulting with them. When the bid documents were submitted, Liao Yu-hui was still acting as the responsible person of Hon Yang Corporation, thus Hon Yang Corporation should be considered the instigator in the license lending activities. The FTC's investigation found no other concrete evidence of agreement to mutually restrict activities between the three companies, thus no determination of concerted action that would violate the Fair Trade Law is possible; however, Hon Yang Corporation's borrowing of the licenses and their lending by Full-Yuan Corporation and Wei Ku Corporation misled the competent authority in charge of the public tender for construction into believing that true competition existed. By misleading a trading counterpart to trade with it, Hon Yang Corporation's acts constitute a deceptive practice and obviously unfair conduct. Therefore the borrowing and lending of licenses by the above enterprises is a deceptive and obviously unfair practices sufficient to adversely affect the trading order in violation of Article 24 of the Fair Trade Law. Prior to the award of contract, however, the bid process had to be annulled several times due to insufficient numbers of participants, which led to the lending of licenses in this bid. Such conduct was not malicious in nature. Therefore, pursuant to Article 41 of the Fair Trade Law, Hon Yang Corporation, Full-Yuan Corporation and Wei Ku Corporation were ordered to immediately cease their unlawful activities, and an NT$200,000 administrative fine was imposed against Hon Yang Corporation, while NT$100,000 administrative fines were imposed against both Full-Yuan Corporation and Wei Ku Corporation.Appendix:Hon Yang Construction & Land Development Co.'s Uniform Invoice Number: 23113483Full-Yuan Development Enterprise Co., Ltd.'s Uniform Invoice Number: 97472336Wei Ku Enterprise Co. Ltd.'s Uniform Invoice Number: 84422068Summarized by Lai, Shu-Ching; Supervised by Tso, Tien-Liang