Hua Hsin Hang Co. (the winning bidder on the "China Petroleum Project to Relocate Elevated Gas Pipes Running Into Box Culverts, Embankments, and Bridges") alleged to have used licenses borrowed from Chi Ku Co. and Tao Hsin Co. in the bidding process
Chinese Taipei
Case:
Hua Hsin Hang Co. (the winning bidder on the "China Petroleum Project to Relocate Elevated Gas Pipes Running Into Box Culverts, Embankments, and Bridges") alleged to have used licenses borrowed from Chi Ku Co. and Tao Hsin Co. in the bidding process
Key Words:
public construction, bid rigging, license leasing and lending behavior, collaborative bidding, concerted action, deceptive acts; inflating the number of bidders
Reference:
Fair Trade Commission Decision of December 9, 1998 (the 370th Commission Meeting); Disposition (87) Kung Ch'u Tzu No. 252
Industry:
Pipeline Construction (4702)
Relevant Laws:
Summary:
This case originated from the investigation of a case captioned "Alleged Bribery in the Bidding on the China Petroleum Project to Relocate Elevated Gas Pipes Running Into Box Culverts, Embankments, and Bridges" by the Southern Mobile Task Force of the Ministry of Justice (MOJ) Investigation Bureau. The Task Force discovered that the winning bidder in this case, Hua Hsin Hang Industries Limited Company (hereinafter "Hua Hsin Hang"), had allegedly taken part in the bidding using licenses leased from Chi Ku Industries Limited Company (hereinafter "Chi Ku Co.") and Tao Hsin Pipeline Construction Limited Company (hereinafter "Tao Hsin Co.") to ensure the winning of the bidding by bid rigging, which had violated Article 14 of the Fair Trade Law (FTL). The Task Force turned the matter over to the Prosecutor's Office of the Kaohsiung District Court. Since the case involves the suspected violation of Article 14 of the FTL, the Prosecutor's Office sent the case files to the Fair Trade Commission (FTC) for advising opinions as to whether the license-leasing and collaborative bidding activities by the bidding firms violated the FTL. To this, the FTC had responded in a letter dated September 14, 1998, Ref. (87) Kung Erh Tzu No. 8709606--001. As to the suspected violation of Article 24 of the FTL involved in this case, it has been approved that the FTC opened a new case file to deal with the issue.
In order to meet the condition that "at least three firms must join the bidding before the bids may be opened," Hua Hsin Hang's responsible person, Huang Ta-ming, and his son Huang Shen-hsueh purchased three bidding forms, determining the bidding amounts, and completed the forms. Huang Ta-ming then arranged to borrow photocopies of documents (company licenses, profit-seeking enterprise registration certificate, performance certificate) and seals from Su Tsung-hsien and Chiang Chien-fa, the responsible person and de facto responsible person, respectively, of Chi Ku Co. and Tao Hsin Co. for use in completing the bidding procedures. On the date of the opening of bids, he sent his employees Yen Ch'eng-chih and Yeh Chao-fang to attend the bid opening in the name of Chi Ku Co. and Tao Hsin Co. His bid of NT$14.88 million, the lowest bidding price, was eventually accepted. These facts are all documented in the 1998 file Chen Tzu No. 16228 forwarded to the FTC by the Prosecutor's Office of the Kaohsiung District Court, and in statements recorded by the FTC. Also, Su Tsung-hsien and Chiang Chien-fa have admitted to having consented, for reasons of kinship and friendship, respectively, to lend Huang the aforementioned documents and seals free of charge to enable Hua Hsin Hang to participate in the bidding in the names of Chi Ku Co. and Tao Hsin Co. These facts are also clearly documented and can be found in the records of the Investigation Bureau Southern Mobile Task Force's investigation of Su Tsung-hsien and Chiang Chien-fa and in statements recorded by the FTC.
Article 24 of the FTL clearly stipulates, "In addition to what is otherwise provided for in this Law, enterprises shall not engage in other deceptive or obviously unfair acts that are capable of affecting trading order." The term "deceptive [acts]" refers to the use of misleading means such as deception or concealment of important facts to cause trading counterparts to trade with it or cause competitors to lose trading opportunities. In the bidding for public construction projects, leasing or borrowing of licenses is a means of deception employed by enterprises to inflate the number of participating bidder to mislead the entity procuring to believe that that competition did exist, and thereby to secure themselves the opportunities of transaction. Even though the examination of the concrete particulars such as the extent to which the collaborative firms were aware of the bidding or to what degree they were involved suggested that the requirements for concerted action in the form of bid rigging defined under Article 7 of the FTL ("where enterprises, by...consent, act in concert to decide the price of goods or services, or to limit trading counterparts, thereby restraining each other's business activities") had not been satisfied, such actions should nevertheless still be governed by Article 24 of the FTL.
The three oil and gas pipeline construction enterprises involved in this case, Hua Hsin Hang, Chi Ku Co., and Tao Hsin Co., were parties to the lending and borrowing of the documents for participation in the bidding on the "Project to Relocate Elevated Gas Pipes Running Into Box Culverts, Embankments, and Bridges" handled by China Petroleum's Kaohsiung business office. The parties used deceptive means to create the false impression that there were three enterprises participating in the bidding and to conceal the important fact that no competition existed, thereby causing the entity that invited the bids to mistakenly believe that the winning bidder had won the right to undertake the project through fair competition, and to award the bid on that basis. Consequently, the entity that invited the bid lost the opportunity to make a new bidding invitation to obtain a lower bidding price. To competitors, they lost the opportunity to participate in fair competitive bidding. The actions harmed the ethic of business competition and obstructed the operation of market price mechanisms. They were thus "deceptive acts capable of affecting trading order" prohibited by Article 24 of the FTL. The three enterprises were therefore ordered, pursuant to the fore part of FTL Article 41, to immediately cease the prohibited actions under Article 24 of the FTL from the day following the date of service of the disposition.
Summarized by Luo Mei-hsia
Supervised by Tsuo T'ien-liang
Appendix:
Hua Hsin Hang Industries Limited Company Uniform Invoice No.: 00291479
Chi Ku Industries Limited Company Uniform Invoice No.: 01511873
Tao Hsin Pipeline Engineering Limited Company Uniform Invoice No.: 43779900