Hello, I am Attorney Eom Sang-yoon from Cheongchul Law Firm.
Today, we will discuss restrictions on the qualifications of bidders and the appealability of the decisions regarding such requests.
[Question]
When the Fair Trade Commission decides to request a restriction on the qualifications of a violating business, can a lawsuit be filed against that decision as well?
[Answer]
The Supreme Court has explicitly ruled that in the case where the Fair Trade Commission (FTC) requested a restriction on the qualifications of bidders due to a violation of the 'Act on the Fairness of Subcontracting Transactions' (Subcontracting Act), the decision to request a restriction on the qualifications of a bidder entails a legal disadvantage whereby a business with knowledge of such a request can challenge only the subsequent restriction on the qualifications of bidders, rather than being allowed to directly contest the legality of the request for restriction, thereby aligning with the principle of rule of law by enabling disputes to be fundamentally resolved early on. (2020Du48260)
In other words, a business that is subject to the FTC's request for a restriction on the qualifications of bidders can seek to cancel the request in addition to waiting for the administrative disposition regarding the restriction.
Article 26, Paragraph 2 of the Subcontracting Act stipulates the basis upon which the FTC can request a restriction on the qualifications of bidders from the head of the relevant administrative agency for businesses that exceed the penalty points for violations of the Subcontracting Act as defined by the enforcement decree. Furthermore, guidelines for examining unfair joint acts in bidding state that if a business that participated in bid rigging has accumulated penalty points exceeding 5 over the past five years, a request for restriction on the qualifications of bidders will be made for the bidding period.
Subcontracting Act Article 26 (Cooperation of Heads of Relevant Administrative Agencies) ② The Fair Trade Commission shall impose penalties on the primary contractor or subcontractor who violates the provisions of Article 3, Paragraphs 1 through 7, and Paragraph 12; Article 3-4; Articles 4 through 12; Article 12-2; Article 12-3; Article 13; Article 13-2; Articles 14 through 16; and Article 16-2 Paragraph 10 as defined by presidential decree, considering the nature and extent of the violation and damage, and when the penalty exceeds the standards as determined by presidential decree, shall request the head of the relevant administrative agency to restrict the qualifications for bidding, suspend business pursuant to Article 82, Paragraph 1, Item 7 of the Construction Industry Basic Act, and take other necessary measures to promote fairness in subcontracting transactions. Enforcement Decree of the Subcontracting Act Article 17 (Criteria for Imposing Penalties, etc.) ② The phrase “exceeds the standards as determined by presidential decree” in Article 26, Paragraph 2 of the Act refers to instances where the cumulative score of violations as specified in Table 3 exceeds the scores classified by the following categories: 1. Request for restriction on qualifications for bidding: 5 points 2. Request for business suspension due to the reasons under Article 82, Paragraph 1, Item 7 of the Construction Industry Basic Act: 10 points [Table 3] Criteria for Imposing Penalties (Related to Article 17) 2. Criteria for imposing penalties a. Penalties are calculated separately by violation types for each type of corrective action and (if different types of corrective actions are taken against violations of the same kind, only the most severe type of corrective action score will be considered), summed up to determine the total. The scores for each type of corrective action are as follows. 1) Warning (in cases where violations are found during a written on-the-spot investigation at the request for voluntary correction by the Fair Trade Commission): 0.25 points 2) Warning (in cases of reporting or ex officio recognition): 0.5 points 3) Corrective recommendation: 1.0 points 4) Corrective order (in cases where a primary contractor or client imposes a requirement to prevent recurrence on a business that has voluntarily corrected violations): 1.0 points 5) Corrective order: 2.0 points 6) Surplus penalty: 2.5 points (if penalties are imposed for violations of Articles 4, 11, 12-3, Paragraph 4, or 19, the penalty is 2.6 points) 7) Prosecution: 3.0 points (if there are charges for violations of Articles 4, 11, 12-3, Paragraph 4, or 19, the penalty is 5.1 points) Guidelines for Reviewing Unfair Joint Acts in Bidding (2) Request for restriction on qualifications for bidding - The Fair Trade Commission may request a restriction on the qualifications of bidders from the bidding agency, taking into account the level and frequency of violations of the relevant businesses (or business groups), in addition to necessary actions against the violating business. (Article 27 of the Law on Contracts to which the State is a Party, Article 27, enforcement decree of the same law Article 76) * However, a request for restriction on qualifications for bidding must generally be made against businesses (or business organizations) that have accumulated penalty points exceeding 5 for bid rigging within the past five years. * Calculation of the five-year period: It should be calculated backwards from the date of the corrective action for the bid rigging, including the day of the initial incident. |
Meanwhile, the FTC's request for a restriction on qualifications for bidding is determined based on the penalty points calculated according to the type of corrective action. Therefore, it may be disputed whether a lawsuit can be filed against the imposition of penalty points by the FTC, but the Supreme Court has explicitly denied this.
“The act of imposing penalty points under the Subcontracting Act is for use as underlying data for requests such as restrictions on qualifications for bidding and cannot be considered an action that directly affects the rights and obligations of businesses, and thus does not fall within the category of administrative dispositions subject to litigation.” (2020Du50683)
The calculation of penalty points for violations of the Subcontracting Act influences future corrective measures and whether to request restrictions on qualifications for bidding. Therefore, during investigation responses, it is advisable to consult with specialists to anticipate the level of penalty points and to devise measures to mitigate penalty points, such as voluntary corrections.
Cheongchul Law Firm consists solely of attorneys from Korea's top five law firms, including Kim & Chang, Gwangjang, Taepyeongyang, Sejong, and Yulchon, as well as in-house legal teams from large corporations, and responds with a team of specialized attorneys for each relevant field of the case rather than a single attorney. Cheongchul provides comprehensive solutions that focus not just on resolving specific issues, but on achieving the overall objectives desired by the client. If you need help in reaching your goals, please do not hesitate to contact Cheongchul.
Related work cases that are good to see together
