Korea’s POSCO E&C caught in bid rigging

POSCO E&C, Korea’s third largest engineering and construction company, has been caught in four different cases of bid rigging this year, and has had to pay fines of KRW 28 billion. The scale of the fines and the frequency of the offences are both unprecedented in the Korean construction industry.

In one example case where POSCO was caught bid rigging, The Fair Trade Commission (FTC) accused POSCO E&C and a second company of rigging a bid on the construction of a sewage treatment plant in Daegu City. The executives involved are to be prosecuted, and the government is imposing KRW 6.242 billion in fines.

Specifically, POSCO E&C not only put in their own bid for the project, but also created a second, low-quality blueprint, and forced another company to submit the inferior blueprint for bidding, creating a false impression of competition. POSCO also dictated the bidding price the company would ask, ensuring that POSCO could offer a lower price to win the bid.

When this was discovered, the FTC commented, “A sewage treatment plant, as an environmental facility, is crucial for people’s health. We imposed relevant sanctions on POSCO, which violated anti-monopoly and fair trade laws.”

The FTC announced last January that it would strictly punish construction companies that engage in collusion activities that involve public businesses. The government is also determined “to reform regulations by blocking illegal collusion activities that could seriously harm fair market orders.” Regulatory reform is one of the important objectives of the current government.

However, POSCO E&C has been caught in collusions almost every month in the first half of this year. Not only did they collude in the bidding for the sewage treatment plant in Daegu, but also for a subway construction project in Incheon, a sewage treatment plant in the Cheongna District in Incheon, a water quality restoration center project in Gwangju, and an urban railway construction project in Daegu.

And worse, the additional profits gained through illegal collusion are much higher than the fines imposed. A businessperson commented, “The FTC punishment for collusion is only a slap on the wrist.”

Despite the fines POSCO E&C does not admit any wrongdoing. A company spokesman was quoted in Korean media saying, “The FTC punishment is quite unfair. We will countersue against the false accusations.”

Ironically, POSCO E&C was the first Korean corporation to enact a code of ethics, and has been emphasizing the importance of ethics in its PR activities.