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KFTC sanctions bid rigging at auctions of shipping services for imported brown rice

Christian Fernsby |
The Korea Fair Trade Commission detected 127 bid rigging conspiracies at auctions of shipping services for imported brown rice conducted by local governments from 2000 to 2018.

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The Commission decided to impose corrective orders and penalty surcharges of 12.737 billion won on 7 companies which participated in bid rigging including CJ Logistics, and to report 4 of them to the prosecution.

7 companies: CJ Logistics, Hanjin, Dongbang, Dongbu Express, Sebang, Intergis and Dongbu Corporation, agreed to geographically (port) allocate winning bidders and decided the bid prices for cover bidding in advance in 127 bids conducted by 8 local governments: 3 metropolitan cities (Incheon, Busan, Ulsan) and 5 provinces (Gangwon-do, Gyeongsangnam-do, Gyeongsangbuk-do, Jeollanam-do, Jeollabuk-do) including Incheon Metropolitan City and Korea Agro-Fisheries & Food Trade Corporation from 2000 to 2018.

Korea Agro-Fisheries & Food Trade Corporation offered two bids in September and December 2017.

The 7 companies met before the first bid of every year and decided amounts that correspond to the size of each company based on the estimated size of the contract to be awarded in that year and geographically allocated contracts among themselves.

In addition, the 7 companies met to set the bid price in advance and agreed to submit a bid that is higher than the bid of the designated winner.

From 1995 to 1998, CJ Logistics provided shipping services for imported brown rice through non-bidding contracts. Since 1999, as the work of the Ministry of Agriculture, Food and Rural Affairs was transferred to 8 local governments including Incheon Metropolitan City, competitive bidding was carried out.

As contracts were awarded through competitive bidding process, the companies needed to prevent price cutting caused by fierce competition in the shipping service market.

The 7 companies adhered to the agreement every year so that the designated winner could win the contract in 127 bids from 2000 to 2018.

The service provider was determined through competitive bidding process, and the unloading work of imported brown rice loaded on the ship was monopolized by CJ Logistics. Most companies except CJ Logistics took about 10% of the profit from the shipping charges, and entrusted CJ Logistics with the shipping of brown rice.

When some of them were given the volumes lower than the volume agreed by each company, the rest shared their exceeding volumes so that every company could get what was promised.

Corrective orders (orders restraining further violations) on 7 companies including CJ Logistics and a penalty surcharge of 12.737 billion won on them except Dongbu Corporation.

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