Korean train manufacturers fined by the FTC for collusion

A subway train in Seoul. [YONHAP]

Three train manufacturers have been fined a total of 56.4 billion won ($43 million) for collusion.

The companies — Hyundai Rotem, Woojin Industrial Systems and Dawonsys — are the only train manufacturers in the country.

According to the Fair Trade Commission (FTC), the companies coordinated on bidding for 11 accounts valued at 2 trillion won. The GTX was included on the list of projects for which the companies had agreements.

The collusion started when Hyundai Rotem proposed in 2013 to Woojin Industrial Systems that they agree to limit competition.

Hyundai Rotem was created in 1999 when three companies, Hyundai Precision Industry, Daewoo Heavy Industries & Machinery and Hanjin Heavy Industries & Construction, merged.

The first collaboration was a 2013 bid for the Gimpo Goldline, a railway that connects Gimpo city with the Gimpo International Airport in Gangseo District, Seoul.

They started colluding for other bids, including for projects related to Seoul lines No. 2, No. 5 and No. 9 and Korail's Airport Railroad Express (AREX), which connects Seoul with Incheon International Airport, and the Busan subway.

In the agreement, Hyundai Rotem would be the only bidder, and Woojin Industrial System would exclusively supply the parts.

With the absence of competition and no bidding war, the basic terms of Hyundai Rotem's bids were accepted.

In 2015, Hyundai Rotem won a bid for 200 cars on Seoul's subway line No. 2 at 209.6 billion won.

Dawonsys emerged as a new competitor in 2017 after merging with Rowin. As Dawonsys competed in projects in 2017 and 2018, it drove down prices.

The three started colluding from 2019. They decided which company would win a certain project, and the two other companies would bid high.

Woojin Industrial System won the bid for manufacturing 336 cars for Seoul subway lines No. 5 and No. 7 in February 2019, while Dawonsys won a bid for 208 Korail cars in September 2019.

Hyundai Rotem won two projects in Gyeonggi, in November and in December the same year.

Through the collusion, Hyundai Rotem won the bid for GTX trains for 345.2 billion won.

"As the rail car manufacturing industry has been exclusive to only three companies, national infrastructure projects have been affected by the collusion for years," said Cho Hong-sun, director general of the cartel investigation bureau at the antitrust agency. "We expect the latest fine will help restore the proper competition in train manufacturing market."

BY LEE HO-JEONG, JEONG JIN-HO [lee.hojeong@joongang.co.kr]