In a significant ruling, South Korea's Fair Trade Commission has imposed hefty fines on three major steel manufacturers, Goryeo Steel, Manho Steel, and DSR Steel, for engaging in a long-running scheme of collusion in wire rope procurement bids. The companies, which control the majority of the wire rope market in the country, have been accused of manipulating bidding processes for 13 years, from 2009 to 2022. As a result, the FTC has decided to fine the companies a total of 1.354 billion won, with the penalties distributed as follows: 520 million won for Goryeo Steel, 519 million won for Manho Steel, and 315 million won for DSR Steel.
Wire rope, a crucial product in industries such as shipbuilding, construction, and shipping, is used to lift and move heavy loads. It is made from a steel core and is known for its durability and strength. Given its critical role in various sectors, the illegal bid-rigging activities of these companies have had a significant impact on the market and the economy. The three steelmakers were found to have coordinated their bids for wire rope contracts, effectively controlling the outcome of procurement processes in both the public and private sectors.
The FTC investigation revealed that the companies colluded by agreeing in advance on which of them would win specific bids. The companies used a combination of meetings and phone calls to share pricing details and designate a "winning" bidder for each procurement. According to the FTC, the three firms orchestrated 34 wire rope bids through Korea Seok-tang Corporation and Korea Steel Co., with the collusion taking place in alternating years. Specifically, Goryeo Steel was set to win in even years, while Manho Steel was designated the winner in odd years.
The companies involved took steps to ensure the rigging was carried out smoothly. They exchanged pricing estimates and even used messaging platforms like KakaoTalk to share sensitive information. The designated "winner" would then place a bid that was either identical to the agreed estimate or slightly inflated. In this way, the companies were able to control the bid results and secure contracts as per their pre-arranged plan. This coordinated effort ensured that each company won the bids they had agreed upon in all 34 instances.
The FTC’s action is particularly significant as these three companies collectively hold around 90% of the wire rope market share in South Korea. The fact that such widespread collusion could go undetected for over a decade highlights the serious challenges in monitoring anti-competitive practices in industries with concentrated market power. By penalizing the companies involved, the FTC hopes to send a strong message that such illegal activities will not be tolerated and to restore fairness in the market.
In addition to the financial penalties, the FTC has decided to refer Manho Steel to the prosecution for further legal action due to its central role in the scheme. The involvement of a key player in this illegal activity is expected to lead to further investigations and potentially more severe legal consequences for the company. The case serves as a reminder of the importance of strict enforcement of antitrust laws, especially in industries where a few dominant players can easily manipulate the market.
The FTC has also emphasized that this investigation and subsequent sanctions are part of its broader effort to monitor the steel industry closely, given its significant impact on various sectors. The commission plans to continue strengthening its oversight of the steel products market, particularly in cases where violations of the law could have far-reaching consequences across industries such as construction, manufacturing, and infrastructure. The ongoing scrutiny is aimed at ensuring fair competition and preventing further instances of market manipulation.
