C.K.S International Airport adopted differential treatment of restricting the bidder’s qualification without justification in the property rental tender of “The Placement of Commercial Advertising at Terminal 1 and Terminal 2”

Chinese Taipei

Case:

Key Words:

International airport, tender, Government Procurement Law, differential treatment, commercial advertising

Reference:

Fair Trade Commission Decision of March 16, 2006 (the 749th Commissioners’ Meeting), Disposition Kung Ch’u Tzu No. 095023

Industry:

Civil Air Transportation (5510)

Relevant Laws:

Article 19, Subparagraph 2 of the Fair Trade Law

Summary:

1. The complainant indicated that C.K.S International Airport had adopted differential treatment of restricting the bidder’s qualification without justification in the property rental tender of “The Placement of Commercial Advertising at Terminal 1 and Terminal 2”. The act is likely to lessen competition or to impede fair competition, and in violation of the provision of Article 19, Subparagraph 2 of the Fair Trade Law.
2. Upon investigation, the Fair Trade Commission (FTC) found that, C.K.S International Airport in conducting the property rental tender of “The Placement of Commercial Advertising at Terminal 1 and Terminal 2” has selectively referred to Article 36 of the Government Procurement Law and the relevant regulations of “Standards for Qualifications of Tenderers and Determination of Special or Large Procurement”. However, C.K.S International Airport ignored the provisions of other preventive measures in the aforementioned law and standards stipulated for the avoidance of competition restraints resulting from the determination of bidders’ qualification. For example, Article 37 of the Government Procurement Law stipulates “…. except for financial qualifications that the supplier may submit in lieu a bank guarantee or an insurance policy under which the bank or insurer shares the performance and compensatory liability with the supplier jointly and severally.” was left out and not referred by C.K.S International Airport. C.K.S International Airport prescribed that the qualified bidder must meet the qualification of having paid-up capital of not less than NT$ 100,000,000, thus causing only a specific number of companies can participate in the bidding.
3. Grounds of Disposition:
1. C.K.S International Airport conducted the property rental tender of “The Placement of Commercial Advertising at Terminal 1 and Terminal 2” for renting out the commercial advertising placement. C.K.S International Airport provided commercial advertising placement to the winning bidders and collected premium from them, thus the private business activities of C.K.S International Airport has met the definition of enterprise in the Fair Trade Law.
2. Although the Public Construction Commission of Executive Yuan（Cabinet） had explained that the tender at issue did not meet the criteria of construction work, property or service procurement stipulated in the Government Procurement Law and thus the said Law was inapplicable. However, C.K.S International Airport had selectively referred to certain provisions of the Government Procurement Law and the relevant sub-laws, but ignored the provisions of other preventive measures in the aforementioned laws stipulated for the avoidance of competition restraints resulting from the determination of bidders’ qualification. Although C.K.S International Airport argued that, “a bank guarantee or an insurance policy under which the bank or insurer shares the performance and compensatory liability with the supplier jointly and severally” might supersede “the requirement of bidder’s capital”, and denied of double restrictions for the bidders’ qualifications, however, the aforementioned argument was not stipulated in the bidding instructions. Moreover, in addition to the performance bond, C.K.S International Airport has prescribed in the bidding instructions of the tender at issue that the qualified bidder must meet the qualification of having paid-up capital of not less than NT$ 100,000,000. Such double thresholds have imposed restrictions on the bidders’ qualifications, and obviously far beyond the extent that is necessary for the ascertainment of winning bidder is “suitable for contract performance” or has “actually fulfilled the contract”. It is not substantiate to conclude that the aforementioned thresholds were based on the just grounds defined by Article 26 of the Enforcement Rules to the Fair Trade Law.
3. When C.K.S International Airport conducted the tender at issue, Hehe Company and Taiwan Mo Fei Erh Company were among members of the advertising business association that have paid-up capital of more than NT$ 1,000,000, and actually engaged in the outdoor commercial advertisement. Both companies were affiliated companies of the winning bidder Po Hung Company and all three companies were externally known as Omniad Media Incorporation. Due to the stipulation of paid-up capital restriction in the tender at issue, some suppliers who were originally interested in the bidding have given up the bidding as they did not meet the paid-up capital requirement stipulated in the tender at issue. As a result, only two suppliers, Po Hung Company and Iwant-in.net Inc could actually participate in the bidding process of the tender at issue and it was difficult to conclude that effective competition can arise in the process. Therefore, it is evident that the capital restriction for bidders prescribed by C.K.S International Airport imposed restraint on competition.
4. Taken into consideration that C.K.S International Airport provides landings and take-offs of international flights, ground services, embarkation and disembarkations of passengers and cargo transits, the aircraft movement of around 180,000 flights and the passenger volume of around 20,000,000 individuals every year, C.K.S Airport is an enterprise that has significant market power. Therefore, the aforementioned differential treatment of restricting the bidders’ qualifications adopted by C.K.S International Airport was unjustifiable. Such conduct has violated the provision of Article 19, Subparagraph 2 of the Fair Trade Law and hence C.K.S International Airport is ordered to cease the aforementioned unlawful act and a fine of NT$ 900,000 is imposed according to the anterior paragraph of Article 41 of the Fair Trade Law.

Summarized by Huang, Yan-Bin;
Supervised by Chiang, Kou-Lun

Appendix:
C.K.S International Airport