2016Guhap106062 Revocation of the qualification to participate in competitive tendering procedures open only to small and medium enterprises, and participants

Revocation of Restriction on Acquisition

A Stock Company

The Small and Medium Business Administration

June 7, 2017

July 12, 2017

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

The defendant's disposition to revoke the plaintiff's qualification to participate in competitive tendering process open only to small and medium entrepreneurs on December 5, 2016, and each disposition to restrict the acquisition of qualification to participate in competitive tendering process open only to small and medium entrepreneurs

1. Details of the disposition;

A. The Plaintiff is a company with the purpose of manufacturing, manufacturing, and selling ready-mixeds, asphalts, and concrete, and B is the head of the Plaintiff’s business team.

B. A cooperative (hereinafter referred to as the "cooperative of this case") consists of 17 companies, including the plaintiff, E, F, G, H, I, K, K, L, M, M, Inc., Inc., 00, P, Q, Q, R, S, S, T, and hereinafter referred to as the "member companies of this case", and individual companies are composed of 17 companies (excluding the plaintiff, E, F, H, H, I, K, K, L, M, and T, and limited liability companies) including the plaintiff producing D.

C. From July 201 to May 24, 2016, the Plaintiff: (a) had the instant association and the instant member companies enter into a negotiated contract (hereinafter referred to as “instant bid”); (b) had, in advance, the instant association and the instant member companies designate a successful bidder (the instant association or the instant member companies); and (c) deposited the bid in the bid at a predetermined bid price; and (d) had the other company receive the successful bidder by the method of not participating in the pertinent bid; (b) failed to select the successful bidder in excess of the initially limited bid price; and (c) had the authority awarding the contract to enter into a negotiated contract by the method of the first limited competition; and (d) had the specific company receive the contract by the negotiated contract (hereinafter referred to as “instant collaborative act”).

D. B, as the head of the Plaintiff’s business team on September 21, 2016, in collusion with the representative director, etc. of the instant member company, obtained pecuniary benefits derived from the total bid price of KRW 54,063,620,875 from the instant collusion, thereby impairing the fairness of the instant bidding by deceptive scheme or other means with respect to the government-funded D purchase bid ordered by public agencies, such as the Public Procurement Service,” 10 months of imprisonment and 2 years of suspended execution (Seoul Central District Court Decision 2016Da4187, 5376 (merged), hereinafter referred to as “related criminal judgment”). B appealed against the foregoing judgment, and the appellate court accepted the appeal by B on February 3, 2017, and sentenced B a fine of KRW 7,00,000 to B (Seoul District Court Decision 2013816, 2016).

E. On December 5, 2016, the Defendant issued a disposition of six months (from December 8, 2016 to June 7, 2017) on the following grounds that the Plaintiff’s instant collaborative act against the Plaintiff constitutes “an unfair act, such as collusion under Article 8(3)3 of the Act on the Promotion of Purchase of Small and Medium Enterprise Products and the Development of Market Support (hereinafter “the Act”).

A person shall be appointed.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1, 2, 5, 6, 9, Eul evidence Nos. 1 through 3 (including each number), the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

The instant disposition shall be revoked on the following grounds.

1) Non-existence of grounds for disposition

There may be room to deem that the Plaintiff did not engage in the instant collusion, and the Defendant cited the instant disposition that the Plaintiff was subject to the disposition by the Administrator of the Public Procurement Service to restrict participation in the competitive bidding conducted by small and medium enterprise proprietors under the Act on the Development of Agricultural and Fishing Villages, which does not constitute grounds for

2) A deviation from or abuse of discretionary power

Considering the fact that the Plaintiff directly participated in only 75 of the instant bidding 1,360, and received only 90,00 among them, five large companies, 65% of the total market, 17 small and medium enterprises, and 35% of the instant collusion in the circumstances of D Product Market where 17 companies occupy 35%, the Plaintiff’s small and medium enterprises, such as the Plaintiff, should be at risk of unfair blood competition, and the instant collusion is merely a deviation from B, a working person, the instant disposition was abused and abused.

B. Relevant legislation

It is as shown in the attached Form.

(c) Fact of recognition;

The following facts can be acknowledged in light of the overall purport of the evidence presented above.

1) Competing the designation of competing products between small and medium entrepreneurs was designated as competing products only between small and medium enterprises under Article 6 of the Act on the Development of Agricultural and Fishing Villages and granted opportunities to participate in the purchase bid procedures ordered by public institutions, such as the Public Procurement Service only to small and medium enterprises. In particular, since a public corporation or quasi-governmental institution, newly established on December 29, 2009, entrusted the purchase of D to the Administrator of the Public Procurement Service with mandatory entrustment, the scale of D's government-funded market has increased since that time.

2) Organization of working-level council, representative council, etc.

A) Around April 2009, the instant member companies established the "Operational Regulations of the D Working-level Council (hereinafter referred to as the "Operational Regulations of the instant member companies") consisting of members companies at the time of the instant association, and consulted on the allocation of quantities and price maintenance in the D supply market including the private capital market among the members. As the representative of the instant association, the working-level council (referring to the group of executive officers in charge of the instant member companies; hereinafter referred to as the "Working-level Council"), the representative council (referring to the group of representative directors of the instant member companies), the file subcommittee, and the Korean file council, etc. to exchange information on the monthly sales performance and inventory status of the instant member companies, maintain the unit price of D supply in the government-funded market, and after executing the joint reduction plan as a method of practice, check whether it complies with the schedule, etc., to adjust the volume of production and release of the government-funded member companies.

B) All of the 17 D manufacturers, a member company of the instant case, participated in the instant working-level council.

3) The method of the instant collusion

A) The instant member companies, with respect to the government-grade D purchase bid, failed to determine the level of successful bid price by taking into account the activity areas, production stock volume, bidding eligibility points, etc. of the members, and then failed to enter into a negotiated contract. The instant member companies, other than those scheduled to award a successful bid and those members, conducted the bid collusion in a manner that does not participate in the pertinent bidding, and the relevant bid bid was conducted in order to enhance the basic amount publicly notified by the ordering agency, such as “free bid, single bid, and bid to exceed the estimated price,” so that a specific member can enter into a negotiated contract.

B) Specifically, in the event that the Plaintiff participates in the bidding individually, the Plaintiff determined whether to participate in the bidding within the first week, and then decided whether to participate in the final bid for each individual bid after consultation with other companies at the instant working-level council. If the Plaintiff is determined as an allocated company for a specific D supplied case by the working-level council of the instant working-level, the Plaintiff determined a bid rate to the extent that it does not exceed the projected price, and requested the new affiliated companies to participate in the bidding by notifying their new affiliated companies of the specific bid bid rate by notifying them of the specific bid rate, and the same applies to other member companies.

4) The main contents of the instant operational rules formulated around 2009, as follows.

Article 5 (Duties of Council) of the Operational Rules of the D Working-level Council shall deliberate and decide on, and execute, the following matters.1. 2. Coordination on the fair No. Serial System and the reasonable price through mutual consultation; 2. Coordination on the surveillance of unfair acts and joint response to unfair bidding; 3. Determination on the No. Serial System and the government-level bidding; 4. When an enterprise producing files for the stabilization of the file industry has committed an act in violation of the purposes of Article 2 in violation of the following subparagraphs, it shall be dealt with jointly by the resolution of the Council. 1. 2. In the case of detection of the violation, the relevant representative director shall be allowed to visit the organization. 2.3. In the case of the violation company, the order of priority shall be excluded from twice of the number of bidding at the government-level and private level; where the violation has great damage to the industry, it may be allowed to withdraw from the previous member company with the consent of at least 2/3, and whether the two members companies may join the Council (the number of members) by setting the No. 12. 1. 5.

(2) On the basis of the basic order, the selection of the first priority shop shall be made in advance of the basic order of tender(s) and the first priority shop(s) shall also be granted by the same rule. (3) Each member company shall be obligated to notify in the executing book whether or not it has received a request for tender(s) within the prescribed time limit without any falsity, and shall be at the same time at the time of the tender(s). (4) Each bidding (s) first priority shop(s) shall be capable of being awarded a bid price as determined by the Council, and shall be punished at the time of the implementation without prior consultation. (4-1) Each bid(s) first priority shop(s) shall be held in order to determine and notify the price decline and settlement conditions to the lower order company(s) and shall be subject to prior consultation. (5) The second priority shop(s) shall be held in the order of the first priority shop(s) shall be replaced by the three (3) order of disciplinary action(s) in accordance with the number of members(s) of each bidding(s).

5) Relevant criminal judgments

From July 2011 to May 24, 2016, Co-Defendant 2 was indicted for facts of the crime, such as the president of the instant association, the representative director, or executive officer and employee of the instant member company. The Seoul Central District Court has significantly undermined the fairness of bidding by abusing the designation of competing products only for several years; the Defendants have ultimately returned to the cost of citizens; the degree of involvement in the instant collaborative act and degree of recognition; the number of participating in the instant collaborative act; the number of times of imprisonment with prison labor for the instant association; the number of representative directors, the representative director, or the ultimate representative director responsible for the pertinent collaborative act; the director, the representative director, the representative director, or the executive director, who will be responsible for the pertinent collaborative act; the Seoul Central District Court's 'B' in the instant criminal judgment; the number of years of imprisonment with prison labor for each of the instant Association (including B); the director, the representative director, or the executive director, for each of the instant case; and the head, for each of the instant Association (hereinafter referred to as the “New Director”).

D. Determination

1) Applicable legislation

In principle, the legality of an administrative disposition shall be determined based on the law and fact at the time when the administrative disposition was taken (see Supreme Court Decision 80Nu412, Dec. 8, 1981). In the case of a punitive administrative disposition, the legality of an administrative disposition shall be determined based on the law and fact at the time of the unlawful act (see, e.g., Supreme Court Decisions 83Nu383, Dec. 13, 1983; 86Nu63, Jan. 20, 1987). The instant disposition is a restrictive administrative disposition, which is “a disposition revoking the qualification for participation in competitive bidding between small and medium entrepreneurs, and restricting the acquisition of qualification for participation for six months, and thus, the applicable law at the time of the act should be applied.

Article 8 (3) of the current Act on the Development of Market Support (amended by Act No. 13866, Jan. 27, 2016) can be revoked or suspended for up to one year where a small or medium enterprise participating in competitive bidding between small and medium enterprises falls under any of the following cases:

However, in cases falling under any of subparagraphs 1 through 3, Article 3 of the former Enforcement Rule of the Act on the Promotion of Purchase of Small and Medium Enterprises (amended by Act No. 10504, Jul. 1, 2011; Act No. 1386, Jan. 27, 2016; hereinafter referred to as the "former Enforcement Rule of the Act on the Promotion of Development of Agricultural and Fishing Villages") provides that "where the Administrator of the Small and Medium Business Administration cancels the eligibility for participation, he/she may restrict the acquisition of the eligibility for participation within one year from the date of cancellation." In addition, Article 8 (3) of the former Enforcement Rule of the Act on the Promotion of Purchase of Small and Medium Enterprises (amended by Act No. 1386, Apr. 28, 2016; hereinafter referred to as the "former Enforcement Rule of the Act on the Promotion of Development of Agricultural and Medium Enterprises") provides that the Administrator of the Small and Medium Business Administration may cancel the eligibility for participation within 10 years from the date of cancellation of the eligibility for participation.

Meanwhile, the facts that the instant collaborative act had existed from July 201 to May 24, 2016 are as seen earlier. In light of the aforementioned provisions, from July 201 to April 27, 2016 among the instant collaborative act, Article 8(3)3 of the former Act on the Development of Agricultural and Fishing Villages, Article 4 and [Attachment Table 1] 3 A of the Enforcement Rule of the Act on the Development of Agricultural and Fishing Villages, Article 8(3)3 of the Act on April 28, 2016 to May 24, 2016, Article 4 and [Attachment Table 1] 3 of the Enforcement Rule of the Act on the Development of Agricultural and Fishing Villages shall apply.

(ii) the existence of the reasons for the action

In full view of the following circumstances, comprehensively taking account of the facts and evidence mentioned above, evidence Nos. 4 and 8, and the purport of the entire pleading, the act of collusion in this case is likely to interfere with fair competition or appropriate execution of contract. Thus, the act of collusion in this case constitutes "an act of improper conduct, such as collusion," under Article 8 (3) 3 of the Act on Support of Development of Agricultural and Fishing Villages or Article 8 (3) of the former Act.

It is reasonable to see that the Plaintiff’s assertion on this part is without merit.

A) Around April 2009, the instant member companies, including the Plaintiff, established the operational rules of the instant case, which consisting of D producers, at the time of the instant association’s initiative, and consulted on the allocation of quantity and price maintenance in the D supply market including the private capital market among the members. On a regular basis, the instant member companies, the instant association, the representatives’ council, files subcommittee, and the National File Council, etc. regularly held a meeting of the instant association, and exchange information on the monthly production and sales performance and inventory status of D between the members companies, and maintain the supply unit price in the government-funded market by exchanging information on the monthly production and sales performance and inventory status of D between the members companies, and by inspecting compliance with the implementation of the said joint reduction plan through the implementation method.

B) As to the method of the instant collaborative act, the instant member failed to determine the level of bid price scheduled, i.e., bid price scheduled, i., bidding price, and bidding price by taking into account the activity areas, production stock, bidding eligibility points, etc. of the members with respect to the government-grade D purchase bid. Members, other than the successful bidder and the ralian, conducted bid collusion in a manner that does not participate in the pertinent bidding, and members, other than the bid price scheduled and the ralian were allowed to enter into a private contract by failing to participate in the relevant bidding in order to raise the basic amount publicly notified by the agency awarding the contract.

C) B, as the head of the Plaintiff’s business team, was convicted of interference with the tender for the criminal facts that “as the head of the instant association and the instant member companies in collusion with the instant member companies, acquired property benefits derived from KRW 14,375,407,749 in total from the successful bid amount of KRW 14,375,749 in collusion with the instant member companies, and thereby, in collusion with the representative director, etc. of the instant member companies, the instant member companies were convicted of interference with the tender for government-grade D purchase ordered by public institutions such as the Public Procurement Service.” The said judgment became final and conclusive.

D) The relevant criminal judgment, together with other co-defendants, has a large scale of committing the instant collaborative act that B committed in a systematic manner over several years, has great impact on fairness in bidding by abusing the designation of competing products only between and among small and medium enterprises, and the means thereof are not good. The benefits acquired by the instant collaborative act are ultimately attributable to the citizen’s burden, and the sentencing was determined based on the degree of involvement in the instant collaborative act, degree of recognition, size of the successful bid price, and frequency of participation. The number of successful bidders awarded the instant collaborative act reaches about 9 cases, and the successful bid amount reaches about 14.3 billion won.

E) The Fair Trade Commission did not take corrective measures or impose penalty surcharges on the instant collaborative act. This is due to the fact that the instant collaborative act is being investigated into the instant collaborative act, not because the instant collaborative act does not constitute collusion.

F) Even in the prior notice on the instant disposition, the Defendant specified the Plaintiff’s act of collusion as the ground for disposition, and did not regard the Plaintiff’s disposition of restriction on participation in bidding as the ground for disposition in the instant case.

3) Whether the discretionary authority is deviates or abused

In full view of the following circumstances, this case’s disposition cannot be deemed to have been abused or abused discretionary power, taking into account the following circumstances where the purport of the entire argument as to the above facts admitted and the evidence revealed earlier. The Plaintiff’s assertion on this part is without merit.

A) According to the Act on the Development of Market Support, where a small and medium enterprise proprietor engaged in unfair conduct, such as collusion, the Defendant shall revoke the qualification for participation in the competitive bidding process open only to small and medium enterprises (Article 8(3)3); and where the Defendant cancels the qualification for participation, it may restrict the acquisition of the qualification for participation within one year from the date of revocation (Article 8(5)). Meanwhile, according to the former Act on the Development of Market Support, where a small and medium enterprise proprietor engaged in unfair conduct, such as collusion, the Defendant may revoke the qualification for participation, or suspend it within one year, and where the qualification for participation is revoked, the acquisition of the qualification for participation may be restricted within one year from

B) According to the above law, where the Act on the Promotion of Market Support was amended and illegal acts such as collusion were conducted, it was stipulated that the eligibility to participate in the competitive bidding process open only to small and medium enterprises should be revoked. However, Article 4 and [Attachment 1] 3 of the Enforcement Rule of the former Act on the Promotion of Market Support, which was applied at the time of the enforcement of the former Act on the Promotion of Market Support, provided that the revocation of eligibility to participate and the acquisition of eligibility to participate for six months should be restricted. Therefore, the Defendant’s failure to enter the former Act on the

C) Even if the criteria for a disciplinary administrative disposition are prescribed in the form of Ordinance, it has nothing to externally bind citizens or courts since it merely provides for the administrative affairs rules inside the administrative agency, and whether such disposition is legitimate or not must be determined in accordance with the contents and purport of the relevant laws and regulations, not only the above disposition criteria, but also the above disposition criteria. Thus, the above disposition criteria cannot be deemed legitimate merely because they comply with the above disposition criteria. However, it cannot be deemed that the disposition in accordance with the above disposition criteria goes beyond the scope of discretion or abuse of discretionary power, unless there are reasonable grounds to believe that such disposition is considerably unfair in light of the contents of the act of violation and the contents and purport of the relevant Acts and subordinate statutes (see Supreme Court Decision 2007Du6946, Sept. 20, 2007). In light of the relevant laws and regulations, it is difficult to view that the above disposition criteria are not consistent with the above disposition criteria in light of the public interest and the extent of the reason for suspension of participation in competitive bidding or cancellation of participation eligibility for a small enterprise in a contract.

D) The Plaintiff was directly or indirectly involved in only 75 cases among the bid 1,360 bid in the instant case and received only 90,000 successful bid among them. However, other than the bid awarded, it should be deemed that the Plaintiff directly or indirectly participated in the instant collusion through the instant association.

E) Most of the members of the instant case were punished as a interference with bidding by the representative director or executive, but the Plaintiff was punished as a interference with bidding by the Plaintiff, which is the head of the business team, and was not punished by the representative director. However, in light of the fact that the Plaintiff acquired profits from the collusion in the instant case over a relatively long period, and the Plaintiff alleged that the Plaintiff was engaged in the entire business and reported only the quantity and amount of the supply, and that it would have been assumed that the Plaintiff granted the comprehensive power of representation to B, it is unreasonable to take the instant

F) As alleged by the Plaintiff, there is no circumstance to deem that the instant collusion was inevitable for five large companies, such as: (a) if the instant collusion was not performed under the circumstances of D Product Market in which the 65% of the entire market and 17 small and medium companies possess 35% of the total market; (b) the Plaintiff’s small and medium enterprises, such as the Plaintiff, etc., should accept the unfair blood competition.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.

The presiding judge, judge and assistant judge

Judges Kim Jong-ho

Judges Han Han-han

1) The foregoing provision was amended by Ordinance of the Ministry of Knowledge Economy No. 193 on July 8, 201, and it was not amended after July 1, 2011.

A person shall be appointed.

A person shall be appointed.

A person shall be appointed.

A person shall be appointed.

A person shall be appointed.