Traffic light manufacturers in Taipei was complained for violation of the Fair Trade Law by participating in the public bidding for traffic light construction project
Chinese Taipei
Case:
Traffic light manufacturers in Taipei was complained for violation of the Fair Trade Law by participating in the public bidding for traffic light construction project
Key words:
traffic light, private legal acts of an administrative agency
Reference:
The Fair Trade Commission Decision of November 19, 1997 (the 316th Commission Meeting); Letter (86) Kung Erh Tzu No. 8507180-0020, 021
Industry:
Road Construction Industry (4502)
Relevant Laws:
Article 24 of the Fair Trade Law
Summary:
The Department of Traffic Control (DTC), Taipei City Government (TCG) in 1996 had seven projects for public bidding, three of which were conducted on December 19, 1995 and four on February 29, 1996. Seven manufacturers in different forms of association with one another succeeded in bidding for these projects. Each of them made a successful bid for one contract without any overlapping, and their tender prices were all close to the floor prices set for these projects.
With regard to the issue of concerted action, all the meetings called by the Taiwan Association of Traffic Light Industry, which was organized by local traffic light manufacturers and approved [by the competent authority] this year, have focused on the discussion of rules and regulations set by the Ministry of Interior and the introduction of traffic light products. The topic of tender bidding by traffic light manufacturers was never raised in such meetings. In addition, a review of the materials provided by the DTC, including the tender sheets and envelopes for the seven projects showed no signs that one specific person was orchestrating the whole bidding or similar handwritings on such documents. No consistency was found in the way such tenders were sent, either. On the other hand, the traffic light manufacturers attended some related meetings organized by the Taiwan Electric Power Association and the Taipei Computer Association, and a review of minutes of such meetings found no evidence proving that the traffic light manufacturers involved in concerted action.
As for the alleged violation of Article 24 of the Fair Trade Law,
(1) The public bidding for the TCG's 1996 traffic light construction project was divided into two categories. Considering the project deadlines and individual contractors' capabilities, even if one contractor won the bidding, it would usually need to cooperate with other manufacturers so as to complete the whole project. Moreover, because of the budget and other factors, the TCG usually calls for tender in the second half of the year. Due to the impact of the annual rate of construction implementation, the DTC divided each major project into three or four parts, and all of the subdivided projects are put out for public bidding at the same time. As a result, the amount of money for each subdivided bidding is similar to one another, while the manufacturers' annual capacity only allows them to acquire the contract for one subdivided project. In addition, the bidding for such public work projects adopts the pre-review system, by which only the qualified manufacturers may submit tenders. As a result, there are usually only ten manufacturers that can make bids. So, by dividing two main projects into seven subdivided ones and inviting tenders for all of them, the DTC may have inadvertently facilitated each bidding manufacturer to acquire one contract. Furthermore, all the bidding manufacturers in the past have provided assistance and support to one another, which may accidentally lead to each manufacturer getting its share of contract at the end of the bidding process.
(2) According to Article 10(3) of the Notice to Bidders, "when signing the contract, the winning bidder shall provide at least two manufacturers in the same industry as its guarantors and one of the guarantors shall be [as qualified as the winning bidder for the project in question]..., the DTC retains the right to approve and select the guarantors of the winning bidder. If the DTC finds the guarantors unqualified, the winning bidder shall look for another guarantor." Because of this provision, the bidding manufacturers tend to guarantee for one another and consequently the winning bidder, feeling obligated to serve as others' guarantor, must continue submitting tenders until the manufacturer for which he guarantees succeeds in bidding. An investigation in this respect showed that the provision applied to all bidding held prior to October 4, 1995. On the other hand, as most of the bidding manufacturers were old acquaintances, though no mutual investment occurred, if the situation where one manufacturer was pre-arranged to be the winning bidder while the other bidders made tenders only for the sake of "being there" did exist, it would not be a chance occurrence unique to 1996. In other words, it could have happened in 1995 as well as in 1997. Nonetheless, an investigation of the bidding results in 1995 and 1997 revealed no such situation where each bidding manufacturer won one contract. Neither was there any material proving that the Taiwan Association of Traffic Light Industry or other main manufacturers had been masterminding such an effort.
(3) On October 17, 1997 the FTC staff paid a visit to the Center and the DTC. They found that in 1996 the specific traffic light project was divided into ten parts instead of seven parts for public bidding, and there were manufacturers that won more than one contract.
(4) As for the similarity between the floor price and the tender price, [an explanation is provided as follows:] the DTC used unit price contracts. All the items and materials incorporated in the bidding for each subdivided project were fixed, and their unit prices were nearly identical. Therefore, a bidder could calculate the unit price fairly easily by "reverse engineering," i.e., making up the balance of bid bond. Furthermore, as the manufacturers face no restrictions in reducing their bid prices, they can figure out the unit prices of other items as soon as the first batch of sealed tenders are opened. So, the bidding manufacturers had no difficulties in estimating the possible floor price for a project, leading to the bid prices being close to the floor ones.
Therefore, based on the facts described above, no concrete evidence supports the allegation that the bidding manufacturers in the instant case have violated Article 24 of the Fair Trade Law.
Summarized by Hu, Chun-hsien
Supervised by Shih, Chin-ts'un