Chunghwa Telecom Co., LTD was complained
for placing improper restrictions on bidders' qualifications in its "Notice to
Bidders in the Computer Graphic System of Telecommunication Pipelines and Sporadic Point
Accumulation Operations of Detailed Information"
Chinese Taipei
Case:
Chunghwa Telecom Co., LTD was complained for placing improper
restrictions on bidders' qualifications in its "Notice to Bidders in the Computer
Graphic System of Telecommunication Pipelines and Sporadic Point Accumulation Operations
of Detailed Information"
Key words:
discriminatory treatment, telecommunication pipelines, computer
graphic system, technical services
Reference:
The Fair Trade Commission Decision of October 15, 1997 (the 311st
Commission Meeting); Letter (86) Kung Erh Tzu No. 8506446-016
Industry:
Telecommunication Industry (6320)
Relevant Laws:
Article 19(ii) of the Fair Trade Law
Summary:
- A complainant wrote to the FTC stating that the Chunghwa Telecom Co.,
LTD (CTC) had imposed improper restrictions on bidders' qualifications by following the
"Notice to Bidders in the Computer Graphic System of Telecommunication Pipelines and
Sporadic Point Accumulation Operations of Detailed Information" (Notice) developed by
the Telecommunications Administration, the previous body of the CTC. According to the
Notice, only "corporate technical services agencies that have registered with and
been approved by the Ministry of Transportation and Communications" (MOTC) may
qualify as bidders. As a result, only a fraction of corporate technical services agencies
were qualified to bid for the project, and most of the lawfully registered technical
service enterprises were excluded from the bidding, which clearly constituted a violation
of Article 19(ii) of the Fair Trade Law on the part of CTC.
- The instant case involves technical services, so it must comply with
the "Main Points in Outsourcing Technical Services with Technical
Consultancies". In order to ensure that the winning bidder was capable of fulfilling
the contract, the CTC drew up the restrictions which it would place on bidders'
qualifications based on the "Main Points in Selection Criteria for Project Designers
and Supervisors," which were developed in accordance with the "Main Points in
Outsourcing Technical Services with Technical Consultancies." The MOTC, the competent
authority in charge of the telecommunications industry, confirmed these facts and pointed
out that the content of these Main Points was not contrary to relevant auditing
regulations. Nonetheless, the MOTC also stated that it could help build the mechanism of
market competition and better compliance with the principle of fair trade if the bidding
for projects in question was opened to other technical services or consultancies that were
equipped with the technical capability and were registered with the government. The
investigation conducted by the FTC also showed that the technical services items to which
the "Main Points in Selection Criteria for Project Designers and Supervisors"
applied included the design and supervision of telecommunications pipelines and civil
engineering projects. However, the projects in the instant case were professional surveys
and filing, whose technical levels were not as complicated as the design and supervision
of telecommunication pipelines or civil engineering projects. Therefore, aside from the
ten corporate technical telecommunication service agencies that qualified as bidders,
there should be other technical service enterprises that can also provide the same
services. In addition, the reason for government agencies to hold public bidding for
contracting construction projects or purchase of goods and services is to improve the
market efficiency and the welfare for all sectors in society by allowing all sellers to
compete on equal footing and buyers to purchase goods or services of desired quality at
reasonable prices through a fair, just and open bidding process. So, equal trading
opportunity should be an essential condition for all public bidding. On this
understanding, while the restrictions imposed by the CTC on bidders' qualifications were
necessary in view of the operational and technical needs, they were hardly justifiable as
such restrictions had indirectly excluded other technically qualified services enterprises
from participating in the bidding.
- On the other hand, according to the CTC, in July 1996 pursuant to the
government's liberalization policy toward the telecommunications industry, it was
reorganized from the original Telecommunications Administration, which in the beginning of
1996 had started the revision of relevant laws and regulations. Since July 1996, the CTC
has taken over the revision and amendment work. Before the reorganization took place,
studies were underway in March and April 1996 to revise the "Main Points in Selection
Criteria for Project Designers and Supervisors." Later instructions given by the MOTC
in a letter demanded the revision to be done in accordance with principles of the Fair
Trade Law. The main focus in the revision was to expand the participation level allowed to
contracted consultancies so that all technical consultancies supervised by the Ministry of
Economic Affairs could participate. As a result, a total of seventeen technical services
consultancies could participate in bidding, instead of ten. The revisions have started to
go into effect since March 1, 1997. Back then, CTC was clearly aware that the restrictions
on bidders' qualifications for contracting the "Computer Graphic System of
Telecommunication Pipelines and Sporadic Point Accumulation Operations of Detailed
Information" originated from the "Main Points in Selection Criteria for Project
Designers and Supervisors." So when the latter was revised, the former must have been
changed too. Moreover, the instant case was complained to the FTC in June 1996; since
then, no projects related to the operations in question have been outsourced by any units
within CTC. In other words, they would not hold invitations to bid until a standard notice
to bidders was completed.
- In summary, the restrictions imposed by the CTC on bidders'
qualifications were tantamount to discriminatory treatment as defined in Article 19(ii) of
the Fair Trade Law and no proper cause could justify the CTC's act. Nonetheless, the CTC
was newly reorganized, which has stopped all outsourcing projects since its regulations
and rules were challenged by the public. Meanwhile, the bidders' qualifications, the issue
at point, are being revised in accordance with relevant laws. So the CTC did not try to
obstruct other enterprises' chance to compete fairly by intentionally creating entry
barriers into the market. Instead, its unconditional commitment to revising the
restrictions on bidders' qualifications in the wake of its reorganization deserves
recognition. Therefore, there is no need to discipline the CTC under the Fair Trade Law.
Summarized by Lu, Li-na
Supervised by Yang, Chia-chun
Appendix:
Chunghwa Telecom Co., LTD's Uniform Invoice Number: 96979949
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