Hello, this is attorney Lee Young-kyung of Cheongchul Law Firm.

On July 26, 2026, the Korea Fair Trade Commission (KFTC) announced its decision to impose corrective orders and penalty surcharges totaling KRW 868 million on three small and medium enterprise cooperatives (qualified cooperatives) and seven member companies for agreeing in advance on the intended winning bidder and the allocation ratio of awarded volumes in a total of 394 purchase tenders for certain power equipment materials (corrugated conduit) ordered by a large domestic public institution over approximately six years from November 2017 to January 2023.

This case is a leading example addressing the structure of collusion mediated by qualified cooperatives in the market for products subject to competition among small and medium enterprises, and the form of participation by member companies. It carries important implications for SMEs and cooperative personnel participating in public procurement tenders. This column is based on the KFTC press release dated July 26, 2026, and the names of individual businesses and cooperatives have been anonymized as A through J.

The decision at a glance – cooperatives agreeing on winning order plus members submitting cover bids

The three qualified cooperatives (Cooperatives A, B and C) had operated by participating in public tenders on behalf of their members and allocating awarded volumes to them. As new entrants increased and win rates fell, they agreed to divide awarded volumes among themselves in proportion to their member numbers in order to secure stable volumes, and implemented the collusion by determining the winning order in advance for each tender and asking the other cooperatives to submit cover bids. Seven member companies of the corrugated conduit cooperative (Businesses D through J) also joined the agreement by submitting cover bids on behalf of the cooperative, or by continuing to participate in tenders through the cooperative, while aware of the collusion among the cooperatives. The KFTC determined that this conduct constituted an "unfair concerted act (bid rigging)" prohibited by Article 40(1)8 of the Fair Trade Act and imposed corrective orders together with penalty surcharges totaling KRW 868 million.

● Collusion period: Nov. 2017 – Jan. 2023 (approx. 6 years)

● Subject of collusion: a total of 394 material purchase tenders ordered by a large domestic public institution

● Result of collusion: of 384 tenders for circular materials, 379 (approx. 98.7%) were awarded as agreed; all 10 tenders for spiral materials were allocated as agreed

● Applicable provision: Article 40(1)8 of the Fair Trade Act (bid rigging)

● Parties sanctioned: 3 qualified cooperatives (A, B, C) + 7 member companies (D–J), 10 businesses in total

● Sanctions: corrective orders (cease and desist) + penalty surcharges totaling KRW 868 million

● How detected: identified and uncovered ex officio through the KFTC's bid rigging indicator analysis system

1. Background and market characteristics

Designation as a product for competition among SMEs and the qualified cooperative structure

The materials at issue were designated as "products subject to competition among small and medium enterprises" under the Act on Facilitation of Purchase of Small and Medium Enterprise-Manufactured Products and Support for Development of Their Markets, so large and mid-sized companies could not participate in the relevant public tenders; only SMEs, or qualified cooperatives participating on their behalf, could do so. Most small manufacturers, lacking large production capacity, operated by participating through a qualified cooperative rather than bidding directly, and receiving an allocation of volume afterwards.

Background to the collusion – intensifying competition and the cooperatives' revenue structure

From around 2017, new entrants increased and competition for volume intensified, and the win rates and awarded volumes of the cooperatives already participating began to decline. Because the main source of income for a qualified cooperative was the fee received for participating in tenders on behalf of members (equivalent to 2% of the contract amount), the interests of the cooperatives in urgently securing stable volumes aligned, and the collusion took shape.

2. Three types of collusion

Type ① Nationwide and region-limited tenders for circular materials (Jun. 2018 – Jan. 2023, 384 tenders)

Cooperatives A and B first agreed on annual volume allocation ratios, then calculated the cumulative contract value each had won as of the announcement date of each tender, and designated as the intended winner the cooperative whose cumulative amount fell short of the agreed allocation ratio. The cooperative not in line to win participated with a cover bid at a bid rate higher than the rate at which it had previously won. As a result, of the 384 tenders, Cooperative A won 204 and Cooperative B won 175, so approximately 98.7% were allocated as agreed.

Type ② Region-limited tenders for spiral materials (Nov. 2017 – Dec. 2022, 10 tenders)

Region-limited tenders for spiral materials proceeded as "desired-quantity competitive tenders," in which businesses submit a supply unit price and their desired allocated quantity, and volume is allocated in ascending order of price. When a tender was announced, Cooperatives A, B and C agreed in advance to allocate volume in proportion to each cooperative's number of members, then bid their desired quantities at high unit prices to avoid price competition, and in all 10 tenders received allocations closely matching the agreed ratios.

Type ③ Participation by seven member companies (from Sep. 2020)

Seven member companies of Cooperative A (Businesses D, E, F, G, H, I and J) did not lead the collusion, but came to know of it through processes such as receiving requests from cooperative staff to submit cover bids on the cooperative's behalf, or attending meetings where the fact of the agreement among cooperatives was shared. Nonetheless, the members continued to entrust tender participation to the cooperative or to submit cover bids, and continued to receive allocations of volume secured through the collusion. The KFTC assessed such passive participation as also amounting to joining the collusion and made it subject to sanctions.

3. Applicable law – Article 40(1)8 of the Fair Trade Act (bid rigging)

The provision applied in this case is Article 40(1)8 of the former Monopoly Regulation and Fair Trade Act (Act No. 17999, amended December 29, 2020), which is maintained identically in the current Monopoly Regulation and Fair Trade Act (Act No. 21644, effective May 12, 2026).

4. Sanctions by business – corrective orders and penalty surcharges totaling KRW 868 million

The KFTC imposed corrective orders (cease and desist) on the three cooperatives and seven member companies, together with penalty surcharges totaling KRW 868 million. For the three cooperatives that led the collusion, however, the final penalty surcharges were adjusted to reflect the fact that they received only part of the contract amount (2%) as a fee, so the scale of their unjust gains was low.

Total: penalty surcharges of KRW 868 million

5. Key implications of this action

Implication ① Even cooperatives intended to support SMEs are sanctioned without exception

Qualified cooperatives participate in tenders on behalf of SMEs and allocate volume to them where those SMEs would find it difficult to bid individually. This case makes clear, however, that even a cooperative serving such a supportive purpose becomes subject to corrective orders and penalty surcharges on the same footing as an ordinary business where it participates in an unfair concerted act (bid rigging) under the Fair Trade Act.

Implication ② Sanctions apply to those who "knowingly join," not only those who "lead"

Even where a member company did not directly lead the collusion, if it came to know of the collusion through requests from cooperative staff to submit cover bids or through attending meetings, and nonetheless continued to entrust bidding to the cooperative or to submit cover bids, it is assessed as having passively joined the collusion and becomes subject to sanctions. This is a point member companies participating in cooperative activities must keep firmly in mind.

Implication ③ Expanding ex officio detection through the bid rigging indicator analysis system

This case was uncovered not through a report but through the KFTC's own detection using its bid rigging indicator analysis system. As an instance in which collusion maintained covertly over a long period in a public institution's own procurement was identified and sanctioned through data analysis, similar ex officio investigations are expected to expand.

Implication ④ A trend of sharply raising the minimum penalty surcharge for unfair concerted acts

The KFTC has recently raised substantially the minimum penalty surcharge for unfair concerted acts such as bid rigging, and has stated that it plans to act even more strictly where similar violations are detected in future. Note that identical collusive conduct may attract far larger penalty surcharges if detected going forward.

6. Cheongchul Law Firm's bid rigging and fair trade investigation practice

Cheongchul Law Firm has extensive advisory, investigation and litigation experience representing both companies and the Korea Fair Trade Commission across the statutes under the KFTC's jurisdiction, including the Fair Trade Act, the Subcontracting Act and the Franchise Business Act. In the field of bid rigging and unfair concerted acts in particular, we manage the risks of companies involved in collusion through investigation response and deliberation response.

This KFTC action can be seen as a warning regarding the overall structure of public procurement bid rigging involving cooperatives and their members, and similar ex officio investigations and sanctions are likely to expand. If you need self-assessment relating to public procurement tenders, risk diagnosis for cooperative activities, response to an investigation notice, or a leniency review, please feel free to contact Cheongchul Law Firm.