South Korea: The Fair Trade Commission (FTC), the country’s state authority for economic competition control, has fined Hyundai Rotem, Woojin Industrial Systems and Dawonsys 56.5 bln KRW ($43.1 mln USD) for participating in collusion on contracts for the supply of rolling stock for local operators for a total amount of 2.4 trln KRW ($2.1 bln USD).
Thus, FTC report states that Hyundai Rotem and Woojin Industrial Systems agreed in advance that Woojin would refuse to participate in tenders for the supply of rolling stock and signaling systems. In return, the company received three contracts for the supply of components for Hyundai Rotem trains. According to Korean law, if only one participant comes to the auction twice, the contract is concluded with him. As to FTC, Hyundai Rotem, using the status of the only participant, tried to conclude contracts at the highest possible price. The report also says that when collecting price offers, Woojin Industrial Systems sent the cost of the rolling stock, agreed with Hyundai Rotem.
Hyundai Rotem won the following tenders in 2013-2016 as a result of collusion with Woojin Industrial Systems:
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- the supply and equipping of signaling systems for a 40 km line connecting Gimpo City and Incheon Airport. Customer: Korail, contract value: 203.7 bln KRW ($186.1 mln USD),
- the supply of 200 metro cars for Seoul. Customer: Seoul Metro, contract value: 209.6 bln KRW ($185.2 mln USD),
- the supply of 2 trains. Customer: Korail, contract value: 23.4 bln KRW ($20.2 mln USD),
- the supply of metro cars for Seoul (the number of cars was not disclosed). Customer: Seoul Urban Infrastructure Division, contract value: 48.3 bln KRW ($42.6 mln USD),
- the supply of 40 metro trains for Busan. Customer: Busan Transportation, contract value: 52.8 bln KRW ($44.2 mln USD),
- the supply of 32 metro cars for Seoul. Customer: Seoul Urban Infrastructure Division, contract value: 44 bln KRW ($36.8 mln USD).
According to FTC, the agreement between the two companies was later broken, and in 2017-2018 the competition took place in the market. However, at the end of 2018, a new agreement was reached. Dawonsys also joined Hyundai Rotem and Woojin Industrial Systems. Under the terms of the new deal, the companies have agreed on which tenders they will submit sole bids. As a result of the new conspiracy, the wins in the 2019 tenders were distributed as follows:
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- the supply of 336 metro cars for Seoul. Winner: Woojin Industrial Systems, Client: Seoul Urban Infrastructure Division, contract value: 373.1 bln KRW ($320.2 mln USD),
- the supply of 208 suburban electric train cars for the Kengin line. Winner: Dawonsys, customer: Korail, contract value: 382.1 bln KRW ($327.9 mln USD),
- the supply of metro cars for Seoul (the number of cars is not disclosed). Winner: Hyundai Rotem, Client: Seoul Urban Infrastructure Division, contract value: 71.2 bln KRW ($61 mln USD),
- the supply of 448 electric train cars for several lines. Winner: Hyundai Rotem, customer: Korail, contract value: 638.6 bln KRW ($548 mln USD),
- the supply of trains for Seoul’s GTX-A high-speed rail line. Winner: Hyundai Rotem, Customer: SG Rail, contract value: 345.2 bln KRW ($296.2 mln USD).
The FTC claims that the collusion was made by Hyundai Rotem, with company’s executives having face-to-face meetings with Woojin and Dawonsys employees. A Dawonsys representative also requested a confidential document from Hyundai employees, which was sent via Telegram, confirming that Hyundai would not participate in the Korail tender.
Hyundai Rotem received the largest fine of 32.3 bln KRW (24.6 mln USD). In turn, Woojin Industrial Systems was fined 14.8 bln KRW ($11.3 mln USD), Dawonsys – 9.4 bln KRW ($7.1 mln USD).
In a commentary to Korean media, Hyundai Rotem confirmed its involvement in the conspiracy, but denied the allegations of its leadership role in it. “Unfair joint actions should not take place in any market environment, and we regret this”, the company said. Hyundai Rotem calls participation in the collusion “an attempt by manufacturers to avoid excessively cheap orders”. As to FTC, Hyundai Rotem accounted for almost 51% of all orders received by it, Woojin Industrial Systems and Dawonsys in 2010-2020. FTC says it will tighten controls on such cartel agreements.
