2013 ICN Cartel Workshop
Plenary I
Cape Town, South Africa
Alternative Means of Cartel Detection
- Introduction of Korea’s system for detecting cartels -
16th Oct 2013
Dae-young Kim
Director, International Cartel Division
Korea Fair Trade Commission
Ⅰ. Preface
 Cartel enforcement has been the one of the
foremost priorities of law enforcement of the KFTC
 Strong law enforcement regime against Cartels
 KFTC: Administrative enforcement
• KRW 2.018 trillion imposed since 1990 ($1.8 billion)
 66.6% of total amount of surcharge imposed on competition law violation
 95.8% of the cartel surcharges was imposed after 2000.
 Prosecutor’s Office: Criminal enforcement
 Private enforcement
Ⅰ. Preface
 While cartel cases with Leniency are skyrocketing…
25
80
20
60
15
40
10
20
5
0
0
1999
2000
2001
2002
2003
number of cases
2004
2005
2006
2007
2008
2009
2010
percentage from total no. of cases
 Up-to-date effective self-detection system still necessary for
 Sending a signal for reinforcing deterrence of cartel
 Sustainable success of Leniency programme
 Overcoming limited resource problem
Ⅰ. Preface
Ex officio
detection
Cartels
detection
Bid Rigging
Indicator
Analysis
System(BRIAS)
Leniency
Programme
Identification
from report
Rewarding
system for
reporting of
cartels
Ⅱ. Bid Rigging Indicator Analysis
System(BRIAS)
 Seriousness of Bid-Rigging in Public Sector
 Waste of national budget
 Scope of harm is far-reaching
 Historically deep-rooted and hard to detect
Figures ↑
Public
institutions
Transfer
BRIAS
Bidding
information
Analyze
Automatic
/Manual
Quantify
The
possibility
of bid
rigging ↑
Ⅱ-2. History of BRIAS
 2006 : The KFTC developed BRIAS / Public Procurement Service’s bidding
 2007 : Legal ground was formulated / four major public enterprises

“The head of a public institution must submit the information on bidding to the
KFTC when the bidding notice is announced or the winning bidding price is
determined.”
 2008 : Central administrative bodies, local governments and state
enterprises
 2013 : automatically receive the information from PPS’s foreign
procurement system
☞ 5,500 bids per year are analyzed
Ⅱ-3. Example of BRIAS Analysis
<Analysis Results>
Analysis 1
Value
Rate of Bid(%)
(A)
Value point
Way of
Competition
Total Points
Value
Number of
participants
Number of
participants exceeding
expected price
Rate of the lowest level
of Bid(%) (Participants)
Restrict
on Record
Analysis 3
A / B (%)
Number of
participants
Number of
participants exceeding
expected price
Total Points
Analysis 2
Rate of the lowest
level of Bid(%) (B)
Number of
participants
Way of
Competition
point
Restrict
on Record
Way of
Competition
Restrict
on Record
Convert to free
contract
No
Increase the
expected price
Total Points
No
Apply
point
Ⅱ-4. System operation mechanism
<Example : Construction of Han-river Bridge>
<Score by types of
<weight by types of
information>
information>
① Forms of bidding :
7 points
① Forms of bidding :
1.3
② Number of bidders :
8 points
② Number of bidders :
0.7
X
<Score X weight>
① Forms of bidding :
9.1 points
=
② Number of bidders :
5.6 points
③ Number of failures
in bidding : 9 points
③ Number of failures
in bidding :
1.8
③ Number of failures
in bidding : 16.2points
④ Contents of bidding
practice : 6 points
④ Contents of bidding
practice :
1.9
④ Contents of bidding
practice : 11.4points
Total score : 42.3 points
Ⅱ-5. Cases in use
• Construction of the Seoul subway No. 7
⇒ quite high bid rigging indicator
⇒ surcharge of $26million
• Education offices’ Group insurances
⇒ quite high bid rigging indicator
⇒ surcharge of $1.7million
Ⅲ. Informant Reward System
 Giving financial rewards to those who reported unlawful
behaviors and submitted the evidence.
 Increasing the possibility of detecting unlawful acts
causing direct and extensive damages but hard to detect
 There are about 50 similar reward systems in Korea.
Subject
Institution
Illegal Financial Brokers
Small and medium Business Administration
Distribution of illegal food
Ministry of Food and Drug Safety
Traffic violation
District police station
Tax evasion
National Tax service
Poaching
Ministry of Environment
Draft dodging
Military Manpower Administration
Violation of election law
National Election Commission
Ⅲ-2. Comparison with Leniency Program
Subjected
behaviors
Eligibility
Effect
Reward system
Leniency program
7 types* of violation of the
Korea Competition Act
including Cartel
Cartels only
Any natural/legal person except
for colluders/bid riggers and
public officials investigating the
case
Enterpriser joining collusion
only the first applicant
rewarded
Up to the second applicants
Reward money
Exemption or reduction of
remedies, surcharges and
accusations
* Cartels, Prohibition of activities by trade ass’n, Discrimination for the benefit
of affiliates, Unfair inducing customers, Sales by employee, Violation of
Notification on large retail store, Violation of Notification on newspaper sales
Ⅲ-3. Ways of scoring reward amounts
 Reward = first reward X Adjustment ratio
1% ⇒
$1.8mil.
A
+
5% ⇒ $ 67.5 thousand
+
$0.45mil.
10% ⇒ $ 45 thousand
$0
Surcharge
First reward
Level of
evidence
Ratio
Highest
100%
High
80%
Middle
50%
Low
30%
Adjustment ratio
Ⅲ-4. Rewards paid during the last 3 years
Year
2010
2011
2012
Rewards for reporting of
cartels(the number of
cases)
$42,480
(4)
$12,910
(3)
$52,110
(5)
The average reward
$10,620
$4,303
$5,022
Rewards for reporting of
violations of the Korea
Competition Act(the
number of cases)
$270,925
(274)
$251,520
(137)
$186,913
(198)
The average reward
$989
$1,836
$944
Thank you for your attention!
daeyoungkim@korea.kr