Complaint filed against bid rigging and illegal bid collusion in connection with bidding procedures for the T'u Ch'eng Line CD267A of the Taipei Department of Rapid Transit Systems
Chinese Taipei
Case:
Complaint filed against bid rigging and illegal bid collusion in connection with bidding procedures for the T'u Ch'eng Line CD267A of the Taipei Department of Rapid Transit Systems
Key Words:
Improper restriction on a bidder's qualifications, discriminatory treatment, to impede with fair competition, concerted action
Reference:
Fair Trade Commission Decision of 26 February 1997 (the 278th Commission Meeting); Dispositions (86) Kung Ch'u Tzu No.s 040 and 041
Industry:
Government Agencies (9111)
Relevant Laws:
Summary:
1. This case involves instances of bid rigging and illegal collaborative bidding. In November 1996 the Taipei Department of Rapid Transit Systems [DORTS] regarding the earth provision works for T'u Ch'eng Station (Tender CD267A) provided that source of the earth of the bidder should meet the following: "government issued documents certificates concerning the acquisition of earth and gravel from the region north of Hsin Chu, the aforesaid documents should not expire until June 1996", "the total amount of earth should not be less than 800,000 cubic meters", "a soil and water conservation plan should be submitted". The rule for the soil and water conservation plan prohibited use of gravel from river beds. The rule for the certificates concerning the acquisition of earth and gravel prohibited the waste dirt from other projects or any was dirt. As a result, only surface dirt would qualify. Besides, since the DORTS placed other restrictions as referred to in the preceding paragraph, there were only five sources of surface earth available. Yu-yu Company's permitted earth supply was 750,000 cubic meters and came closest to the tender requirement. The earth sources for the other four companies totaled less than 570,000 cubic meters. DORTS's did not realized that its tender restriction made all bidders have to acquire Yu-yu Company's source of earth in order to participate in bidding. When it found out that there were four bidders acquiring the same earth source, it was reluctant to relax the restrictions on the earth sources. Moreover, it exercised flexibility to regard qualified earth from the Yu-yu Company as being able to reach 1.5 million cubic meters despite the fact that Yu-yu could only supply 750,000 cubic meters qualified earth. Consequently, the Lin Chi Company, which only acquired earth from Yu-yu was found to have met the bid requirements. These acts of DORTS de facto benefited the interests of a specified firm - the Lin Chi Company. The qualification set by DORTS based on the source of earth and the interpretation it used later already involved discrimination against bidders without due cause. With a dominant position in the domestic civil and rapid transit engineering market, DORTS' acts likely impeded fair competition and constitutes violation of Article 19(ii) of the Fair Trade Law.
2. With regards to the collaborative bidding practices among three companies: Lin Chi, Kuang Chi and Hsing Ch'ang. Originally there were five companies participating in the bid. DORTS' restrictions on earth acquisition resulted in the disqualification of the Chung Hua Engineering Company during the qualification screening stage. Another company, Pao Ch'uan Company, was unable to obtain the supply of earth from the Yu-yu Company and thus was also disqualified during the technical screening stage. Reduction of number of bidders provided an opportunity for the remaining participants and the Lin Chi Company initiated the collaboration. Lin Chi obtained the earth procurement report based on the Yu-yu Company's supply prior to Kuang Chi's and Hsing Ch'ang's participation in bidding and made the report available for Kuang Chi and Hsing Ch'ang to use; therefore, the three companies all used the same report. It was clear that Kuang Chi and Hsing Ch'ang were cooperated bidders, that's why they were actively seeking sources of earth but collaboration on false statement that the earth source report was directly from Yu-yu. No doubt, the parties shared the reports at the outset and then agreed among themselves how to collaborate. Concerted action is that market participants jointly obstruct or reduce competition. The acts of Lin Chi, Kuang Chi and Hsing Ch'ang meet the elements of concerted action as follows:
(1) they are competitors in a market,
(2) there is a meeting of the minds,
(3) there is actual mutual restriction on the activities of the enterprises participating in the concerted action,
(4) the concerted actions affect the normal supply and demand forces of the market. As such there was a violation of article 14 of the Fair Trade Law which prohibits unjustified concerted actions by enterprises.
Summarized by Huang, Ch'ung-chie
Supervised by Yu, Su-su
＊＊: For information of translation, click here
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