Korea Electric Power corrugated pipe bids rigged by 3 cooperatives, 7 firms

Three cooperatives and seven businesses that pre-arranged winning bidders and volume allocations in corrugated pipe procurement tenders issued by Korea Electric Power Corporation have been sanctioned by the Korea Fair Trade Commission.

The Fair Trade Commission said Sunday it had decided to issue corrective orders and impose a combined fine of 868 million won ($591,000) on the three cooperatives and seven businesses for bid rigging in corrugated pipe procurement tenders.

The sanctioned parties are three cooperatives — the Korea Synthetic Resin Corrugated Pipe Business Cooperative, the Korea Plastics Technology Research Business Cooperative and the Korea PE Pipe Industry Cooperative — along with seven businesses: Youngjin Industrial, P&I, Sejin Engineering, Sinho, Green Auto Tech, Cob International and Oju Industrial.

According to the Fair Trade Commission, the three cooperatives pre-arranged winning bidders and volume allocation ratios across 394 corrugated pipe procurement tenders held between November 2017 and January 2023, while the seven businesses were found to have joined the collusion with knowledge of the scheme.

Corrugated pipes are ridged plastic conduits used to encase and protect power cables, classified as either circular or spiral depending on the shape of their ridges. At the time, corrugated pipes were designated as products reserved for competition among small and medium-sized enterprises, meaning only SMEs or qualified cooperatives acting on their behalf could participate in public tenders.

The three cooperatives subject to this action are qualified cooperatives that enter procurement tenders on behalf of their member companies — with member consent — and then distribute awarded contracts among them. The seven businesses are member companies of the Korea Synthetic Resin Corrugated Pipe Business Cooperative and participated in tenders either under the cooperative's name or their own.

The investigation found that the Korea Synthetic Resin Corrugated Pipe Business Cooperative and the Korea Plastics Technology Research Business Cooperative pre-arranged the winning order across 384 national and regionally restricted circular corrugated pipe tenders held between June 2018 and January 2023, then bid accordingly.

The two cooperatives first agreed on annual volume allocation ratios, then calculated cumulative contract values up to each tender announcement to identify whichever cooperative had fallen short of its agreed share, designating that one as the intended winner. The designated winner would then ask the other to submit a sham bid, and the cooperative receiving that request would bid at a higher rate than its previous winning bid.

As a result, the Korea Synthetic Resin Corrugated Pipe Business Cooperative won 204 of the 384 tenders and the Korea Plastics Technology Research Business Cooperative won 175. The remaining five were won by businesses that had not taken part in the collusion.

The three cooperatives also agreed to allocate volumes in proportion to each cooperative's number of member companies across 10 regionally restricted spiral corrugated pipe tenders held between November 2017 and December 2022.

Those tenders used a "desired-quantity competitive bidding" format, in which participants submit a unit price and a desired volume and contracts are awarded in ascending order of price. All 10 tenders resulted in volume distributions closely matching the pre-arranged ratios.

The seven member companies of the Korea Synthetic Resin Corrugated Pipe Business Cooperative were also found to have participated in the collusion with knowledge of the scheme. Acting on requests from cooperative officials, they submitted sham bids on the cooperative's behalf or participated through the cooperative, and received a share of the volumes the cooperative secured through the rigging.

The Fair Trade Commission determined that the conduct violated the law by undermining free and fair competition. However, it factored in the relatively limited scale of illicit gains — the three cooperatives that led the collusion collected only a 2 percent commission on contract values — when setting the final fine.

The case was detected after the commission's bid-rigging symptom analysis system flagged signs of collusion.

The commission said the action was significant because it had independently identified and uncovered collusion maintained covertly over an extended period in tenders issued directly by a public institution. It added that qualified cooperatives participating in tenders on behalf of small and medium-sized enterprises are subject to sanctions if they engage in bid rigging, and that member companies that knowingly participated in collusion — even without leading it — will be sanctioned without exception.

The commission said that, given its recent substantial increase to the minimum fine for illegal concerted actions including bid rigging, it intends to respond more strictly to any similar violations detected in the future.