Kaohsiung District Prosecutors' Office, prosecuting Chuang Ping-huang and others for allegedly collaborating in bid rigging for the contract of the Taichung Air Force Warehouse, requested for the opinion of the Fair Trade Commission regarding whether the act involved concerted actions prohibited by the Fair Trade Law
Chinese Taipei
Case:
Kaohsiung District Prosecutors' Office, prosecuting Chuang Ping-huang and others for allegedly collaborating in bid rigging for the contract of the Taichung Air Force Warehouse, requested for the opinion of the Fair Trade Commission regarding whether the act involved concerted actions prohibited by the Fair Trade Law.
Key words:
bid rigging, bid award, bidding cartel, license borrowing, efficacy of competitive bidding
Reference:
Fair Trade Commission Decision of 2 September 1998 (357th Commission Meeting), Decision of 16 September 1998 (358th Commission Meeting); Letter (87) Kung Er Tzu No. 8706739-001
Industry:
Other Construction Industry (4900)
Relevant Laws:
Articles 7 and 14 of the Fair Trade Law; Article 2(1) of the Enforcement Rules of the Fair Trade Law
Summary:
The Kaohsiung District Court Prosecutors' Office, prosecuting Chuang Ping-huang and others for allegedly collaborating in bid rigging for the contract of the construction of the Taichung Air Force Warehouse (the subject contract), requested for the opinion from the Fair Trade Commission (this Commission) on the following questions: (i) Is an act of inviting other businesses to join a bid rigging, intended to satisfy the government's bidding requirement of minimum three bidders, a concerted action? (ii) Does such act affect market efficiency? (iii) Is bid awarding necessary to confirm the effect of the concerted action on market efficiency?
Article 11 of the Statute for Reviewing Construction Work and Purchase/Order/Sale of Properties by Government Agencies provides: "With respect to the tendering procedures for a construction work, or the procurement, order or sale of properties, the tender may be opened only when there are three or more bidders ...." The legislative purpose of the said provision is to secure fair and free competition in the bidding system and to obtain quality goods/services with reasonable prices. Therefore, although the requirement is fulfilled in formality when a bidder invite other businesses to join the bidding, its intention is to carry out a bid rigging and the act is detrimental to the fairness and competition of the bidding system. The provision cited above cannot be taken as a justifiable defense. In the 93rd Commission Meeting, this Commission adopted the "Study on Issues of Public Construction Bidding Concerning the Fair Trade Law", stating the following situations in which the Fair Trade Law (FTL) is applicable to bid rigging:
(1) Articles 7 and 14 of the FTL regarding concerted actions shall apply where the bidder reaches an agreement with other potential bidders, through prior negotiations, on who will give the lowest bid, whether to jointly tender high bids, or whether to jointly withdraw from tendering bids so as to force the abortion of the bidding and compel the tenderer to raise its bottom offer.
(2) Article 24 of the FTL regarding "deceptive or obviously unfair acts that are sufficient to affect trading order" shall apply where the bidder is engaged in borrowing another's license to join the bidding in order to increase the number of bidders and meet the requirement.
To apply Articles 7 and 14 of the FTL regarding concerted actions to cases of bid rigging, it must be established that the act of bid rigging is "sufficient to influence the supply-demand market mechanism of production, trade in goods or provision of services" as provided by Article 2(1) of the Enforcement Rules of the Fair Trade Law. However, since bid rigging per se impedes the efficacy of competitive bidding where the bidders may freely compete to win the bid and the contract may be awarded at a fair price, bid rigging itself is an act that directly restrict competition. Accordingly, it is not necessary to further identify the scope and level of market that are affected. Where the potential bidders reach an agreement to restrict their business activities, their act may be found sufficient to affect adversely the efficacy of competitive bidding at the relevant market levels.
Where the potential bidders reach an agreement to restrict their business activities, whether the agreement has been practically enforced or remains at the stage of a "meeting of the minds," such act is considered sufficient to affect the efficacy of competitive bidding at the relevant market levels. "Bid awarding" is not a required element to establish that a bid rigging act is concerted action.
Summarized by Yen T'ing-tung
Supervised by Yu Su-su