Hello, I am Law Firm Cheongchul Attorney Eom Sang-yun.

Today, we will discuss the types of bid rigging and the corresponding evaluation criteria.

[Question]

Do the evaluation criteria change depending on the type of bid rigging?

[Answer]

Collusion during the bidding process (unfair joint actions) is classified as 'hard collusion', which has no efficiency-increasing effects and only results in competition restrictions. Therefore, the evaluation criteria do not significantly change based on the type of collusion.

However, the Fair Trade Commission (FTC) categorizes bid rigging based on its targets and provides illustrative detailed handling guidelines.

The FTC's 'Guidelines for Reviewing Unfair Joint Actions in Bidding' (Bid Rigging Review Guidelines) classifies the types of bid rigging into: ① Bid price collusion, ② Pre-determination of the expected winner, ③ Inducing competitive bid contracts to private contracts, ④ Determining amounts to be contracted, ⑤ Management interference, and provides examples of activities that have a high possibility of legal violation and those that are permissible for each action.

(1)     Bid Price Collusion

This refers to actions that determine the minimum bid price, anticipated contract price, etc. For example, it includes actions where businesses negotiate bid prices or determine bid prices through information exchange, and where business organizations participate in determining bid prices and provide price-related information to their members. However, simple acts of jointly investigating the amount publicly announced by the issuing agency cannot be regarded as an agreement, so they are not prohibited.

(2)     Pre-Determination of the Expected Winner

This refers to actions where businesses jointly decide on the expected winner or the method of selecting the expected winner. For example, it includes actions where certain businesses take turns winning contracts, or where a specific business prepares estimates on behalf of other bidders and enables them to participate in the bid. Conversely, actions where a competitor with an advantage voluntarily does not participate in the bid are not considered bid rigging.

(3)     Inducing Competitive Bid Contracts to Private Contracts

This refers to actions where businesses jointly decide and induce a specific business to contract through a private contract. For example, it includes actions where businesses agree to induce a bid to a private contract and all bid above the anticipated price to ensure continuous failure to win or intentionally ensure no one participates in the bid. However, participating in the bid simply because the conditions for winning are not met, without any agreement with other businesses, is not prohibited.

(4)     Determining Amounts to be Contracted

This refers to actions where businesses jointly determine and allocate the amounts related to the bid. For example, it includes actions where a business presents a deliberately low bid amount to induce joint bidding, even though they can fulfill the full amount alone. Conversely, it is difficult to see the act of business organizations grasping and publicly announcing overall performance trends and forecasts related to the bidding as bid rigging.

(5)     Management Interference, etc.

This refers to actions where businesses participating in the bid jointly influence the bid prices of other businesses or the determination of the expected winner. For example, it includes actions where a business organization sets targets related to bid prices for the participating businesses or requests prior notification on their participation status. Conversely, expressing simple opinions regarding the bidding system or explaining general matters does not constitute collusion.

It should be noted that the activities of business organizations can be judged as collusion. In reality, there are cases where discussions related to bidding are held through business organizations or where statistics are aggregated, and such activities can lead to agreements on volume distribution. If the FTC conducts an investigation into business organizations, they must convincingly explain that the activities are not collusion, but rather normal functions aimed at explaining the system to member companies or increasing efficiency.  

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