Law Firm Cheongchul (Lead Attorneys: Eom Sang-yoon, Lee Young-gyeong) represented client A, a furniture company, in a case where the Fair Trade Commission (hereinafter referred to as "FTC") imposed corrective orders and penalties on furniture companies for agreeing and executing to set the successful bidder or bid prices in built-in special bid furniture tenders conducted by construction companies over approximately 8 years. The court ruled to dismiss the client's request for cancellation of the FTC's corrective order and penalty payment order.
1. Background of the Case
The plaintiff (furniture company A) is a manufacturer and seller of furniture and has participated in tenders for built-in special bid furniture purchased by construction companies. However, the plaintiff has shared price quotations with other furniture companies (i) so that the company providing the quotation becomes the expected successful bidder, and other companies agree to bid at higher prices than that company, or (ii) has agreed to share quotations without determining a successful bidder and bid in the same manner with a specific business entity.
In response, the FTC determined that the actions of the plaintiff and other furniture companies fell under the bid rigging prohibited by Article 40, Paragraph 1, Subparagraph 8 of the Monopoly Regulation and Fair Trade Act (hereinafter referred to as "Fair Trade Act") and imposed corrective orders and penalty payment orders on the plaintiff.
Subsequently, the plaintiff filed a lawsuit to cancel the FTC's disposition, arguing that it was unlawful.
2. Legal Issues (Main Grounds and Issues of Cheongchul)
In this case, the plaintiff argued that merely receiving price quotations for the bidding target project does not constitute an agreement and that they only submitted bids to maintain their qualifications without any intention to win the bid, thus no unfair joint action was established. Furthermore, the plaintiff claimed that the FTC's penalty assessment was excessive due to exceeding discretion, making the penalty payment order unlawful.
In response, Cheongchul argued that (i) the agreement in unfair joint action is a broader concept than the agreement as understood in contracts, and if there is an implicit understanding even if there is no meeting of the minds, it can be considered that an "agreement" exists, and (ii) the purpose of the Fair Trade Act, which prohibits bid rigging, is not only to protect the outcome of the bids but also the fairness during the bidding process, so even if the plaintiff had no intention to win the bid, if they participated in the agreement regarding the expected successful bidder or bid prices, unfair joint action could be recognized.
The court accepted Cheongchul's arguments and dismissed all claims for cancellation by the plaintiff. In particular, the plaintiff submitted bids at prices higher than the actual quoted prices received, and there was a statement that the company providing quotes asked the plaintiff for a bid to aid in the process. Furthermore, even if there was no intention to win the bid, requesting quotes while expressing to other companies the intention to forgo the contract was seen as an unfair joint action that reduced competitive pressure.
The court also recognized that the FTC's disposition was lawful regarding the excess of discretion in determining the penalty. The defendant is not obligated to apply different standards of imposition for violations based on the degree of participation in joint action and the distribution of roles for each violating business entity, and it was not necessary to apply the standards of imposition used for bid rigging cases from other construction companies to this case.
3. Significance (The Meaning of this Case)
Bid rigging is a type of collusion where signs of collusion, such as bid rates, are relatively clear. Moreover, when the investigation begins, some participants often apply for leniency, and the FTC typically has a substantial amount of evidence, making it difficult to deny collusion during litigation.
In this case, the plaintiff claimed that agreement could not be established merely by sharing quotations, but it seems insufficient to deny the establishment of collusion given that the sharing of quotations was executed based on an implicit understanding that had already formed among furniture companies. Rather, sharing quotations is seen as one of the actions that sustain the collusion that has previously existed by sharing prices with aiding participants, and the court seems to have understood it this way as well.
This ruling is a reaffirmation of the court's standards and judgments regarding the establishment of bid rigging. It raises awareness for the establishment of fairness in bidding and free competition order, emphasizing the need for companies to exercise particular caution in future bidding processes.
If you need clear solutions for disputes similar to this case, please feel free to contact Law Firm Cheongchul.
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