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Photo= Fair Trade Commission |
[Alpha Biz= Kim Jisun] Ten companies, including Hyosung Heavy Industries, LS Electric, and HD Hyundai Electric, were fined hundreds of billions of won for colluding in bids for Korea Electric Power Corporation (KEPCO)'s power plant equipment for seven years.
The Korea Fair Trade Commission (KFTC) announced on Sunday that it had imposed total fines of KRW 39.156 billion on the 10 companies for violating the Monopoly Regulation and Fair Trade Act (Fair Trade Act) and referred six of the companies for prosecution.
The fines imposed on the sanctioned companies are as follows:
Hyosung Heavy Industries (KRW 11.237 billion)
LS Electric (KRW 7.239 billion)
HD Hyundai Electric (KRW 6.699 billion)
Iljin Electric (KRW 7.52 billion)
Dongnam (KRW 2.14 billion)
D2 Engineering (KRW 1.199 billion)
Seojeon Electric (KRW 809 million)
Intec Electric & Electronics (KRW 419 million)
Jeryong Electric (KRW 1.165 billion)
Korea Electrical Industry Cooperative (KRW 729 million)
Among these, the companies referred for prosecution are Hyosung Heavy Industries, LS Electric, HD Hyundai Electric, Iljin Electric, Jeryong Electric, and Korea Electrical Industry Cooperative.
The collusion involved Gas-Insulated Switchgear (GIS), which protects power facilities by quickly disconnecting excessive currents at power plants or substations. The capacity of GIS devices varies depending on installation conditions (ranging from 25.8kV to 800kV), and the target of collusion in this case was 170kV products.
To participate in KEPCO's GIS 170kV bids, bidders must first obtain qualification from KEPCO. Until October 2014, before Dongnam, a small business, entered the bidding market, only four companies—Hyosung Heavy Industries (then Hyosung), LS Electric (then LS Industrial Systems), HD Hyundai Electric (then Hyundai Heavy Industries), and Iljin Electric—held bidding qualifications.
Dongnam entered the market in late 2014 and initially submitted low-priced bids. However, in early 2015, Dongnam proposed collusion to Iljin Electric to increase the bid success rate, which was accepted, marking the start of collusion.
Subsequently, other small businesses like Jeryong Electric, Seojeon Electric, D2 Engineering, and Intec Electric & Electronics, which acquired bidding qualifications from KEPCO, joined the collusion one after another.
The four large firms and Dongnam initially agreed to divide quantities in an 87:13 ratio. As more small businesses joined the collusion, the allocation ratio between large and small firms was adjusted to 60:40 and eventually to 55:45.
To minimize the risk of detection, communication regarding the agreement was managed through representatives, referred to as "general managers," within each group of firms. Initially, the small businesses directly negotiated with the general manager of the large firms, Iljin Electric.
However, with the increasing number of small businesses and the large firms' demand for a unified channel, the Korea Electrical Industry Cooperative assumed the role of general manager for the small businesses starting in June 2018. It also received a fee of 0.6% of the contract value as commission.
During the collusion period, KEPCO held 134 competitive bids worth approximately KRW 560 billion. Both large and small businesses secured contracts according to the agreed allocation ratio, with the bid success rate exceeding an average of 96%.
AlphaBIZ Kim Jisun(stockmk2020@alphabiz.co.kr)
