The Department of Rapid Transit Systems of Taipei City unduly restricted the qualifications for bidders for the "CH227 Project of Hsintien Line"

Chinese Taipei

Case:

The Department of Rapid Transit Systems of Taipei City unduly restricted the qualifications for bidders for the "CH227 Project of Hsintien Line"

Key Words:

undue restrictions on qualifications for bidders, discriminatory treatment, hindering fair competition

Reference:

Fair Trade Commission Decision of February 23, 1994 (the 124th Commission Meeting); Disposition (83) Kung Ch'u Tzu No. 025

Industry:

Government Agencies (9111)

Relevant Laws:

Article 19(ii) of the Fair Trade Law

Summary:

1. Shangta Construction Company complained to the Commission to the effect that the Department of Rapid Transit Systems of Taipei City ["the Department"] unduly restricted qualifications for bidders without proper or justifiable cause. The Commission thus set up an ad hoc task force to look into the case to see if Article 19 of the Fair Trade Law relating to hindrance of fair competition shall apply in terms of market definitions and market positions.

2. All units of the Taipei City Government adopted uniform construction regulations, applied the same inspection procedures before acceptance, and standardized all related forms. Therefore, the Department decided that regarding the businesses performance relating to works in progress, which is a part of the qualifications required for participation in the bidding, only the works in progress procured by the units of the Taipei City Government would be counted. However, business performance relating to works in progress is an existing fact. Irrespective of whether the works are awarded by an agency at the central government level, Taiwan Provincial Government, or Kaohsiung City Government, such works shall belong to part of the public works procured by the government. If only the works in progress procured by the Taipei City Government count in this regard, there will be de facto discriminatory treatment. Moreover, according to the explanation made by the Department, no special technology was involved in the works concerned, which is just part of the general civil engineering market. The Department's statement that there were procedural difficulties in verifying and counting the bidder's business performance could not be justified. On the other hand, the total value of the contracts of general civil engineering works awarded by the Department in 1990, 1991, and 1992 amounted to NT$ 113 billion, while the total value of the general civil engineering market over the same period of time was NT$ 907.3 billion, and thus the Department enjoyed a market share of 12.45%.

3. The elements to constitute a violation of Article 19(ii) of the Fair Trade Law is to treat another enterprise discriminatively without due cause, and thus likely to impede fair competition. If a procuring entity required some qualifications for bidders, those who could not meet the specific requirements and therefore could not participate in bidding, the act of procuring entity would be deemed discriminatory treatment. Decision in regard to whether such discrimination could be justified shall be made in consideration of the relevant factors set out in Article 23 the Enforcement Rules of the Fair Trade Law, such as the supply/demand situation of the relevant market, difference in costs, amount in each transaction, credit risks and other reasonable or justifiable causes. As for whether or not fair competition might be impeded, it depended on the market share of the specific government agency. With a market share of 12.45%, the Department excluded bidders who were capable contractors as manifested in their business performance relating to works in progress outside Taipei City from participating in the bidding. The essence of fair competition in the market had been impeded and efficiency competition in the market might not be able to prevail. Thus, there was a violation of Article 19(ii) of the Fair Trade Law.

　

Summarized by Huang, Chung-chieh
Supervised by You, Su-su

＊＊: For information of translation, click here

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