Builders to face heavy penalties for pipeline cartel

The nation’s major construction companies are expected to be slapped with significant antitrust fines for operating a cartel during a plumbing project initiated by the Korea Gas Corp.

According to the Fair Trade Commission and the Ministry of Land, Infrastructure and Transport, some of the 23 participants have been suspected of fixing prices during construction of gas pipelines that were requested by the state-controlled KOGAS.

The allegation involves the builders’ irregular practices when they responded to the public firm’s first order for LNG pipelines in May 2009 and the second order between April 2011 and September 2012.

Market insiders in the construction industry predict the collective fine, to be imposed to rule-violators by the regulator FTC, could reach 600 billion won ($555 million) or more.

The FTC reportedly set the fines in its sanction committee meeting last week and is scheduled to make its punishment public after notifying each cartel participant of its move in the coming weeks.

The fine could be adjusted in the future, but the coming antitrust penalty on the construction industry is likely to set a record high, surpassing the combined fine of 435.5 billion won that was handed down to colluders during construction of the Honam High Speed Railway.

An executive of a construction firm was quoted by a news outlet as saying “the FTC appears to take stern disciplinary measures. As a result, rumors have it that the total fine would come to 600 billion won at least and up to 900 billion won.”

A major builder has reportedly set aside a reserve, worth about 30 billion won, for the coming fine. The provision was made as part of the company’s first-quarter net profit earnings.

Some small-sized builders have been forced to apply for loans to pay a series of antitrust fines.

By Kim Yon-se (kys@heraldcorp.com)