S1 and S-Tech Fined $730,000 for Bid Rigging in Apartment Security Contracts

Approximately two years of collusion involving bid rigging for integrated security services at private apartments in six regions, including Busan and Gwangju, has been uncovered involving S1 and S-Tech Systems.

On July 5, the Fair Trade Commission announced that it has imposed corrective orders and a total fine of 973 million won (about $730,000) on S1 and S-Tech Systems for pre-arranging the winning bidder and bid prices in the integrated security service tenders.

The collusion occurred from November 2022 to January 2023 across 23 private apartment complexes in Busan, Gwangju, Daejeon, Sejong, South Chungcheong, and North Chungcheong.

S1 had S-Tech Systems participate as a dummy bidder in tenders for security services at apartments where S1 had previously conducted business. Although S1 expected to have an advantage in the proposal evaluation, it requested S-Tech Systems to participate to prevent the bids from failing or being declared void.

Before the bids, the two companies agreed on S1 as the expected winning bidder and coordinated S-Tech Systems' participation as a dummy. They also agreed on bid prices when necessary. As a result, S1 won 21 out of the 23 bids or entered into negotiated contracts after the bids failed. Only two bids were awarded to a third-party company.

Consequently, over 90% of the colluded bids resulted in contracts with S1. The repeated participation of the dummy bidder limited actual competition, despite the appearance of a competitive bidding process.

S-Tech Systems had little experience in providing integrated security services in the six regions, making it difficult to consider them a genuine competitor to S1. The long-standing cooperative relationship following S-Tech's spin-off from S1 was seen as a contributing factor to the collusion, according to the Fair Trade Commission.

Integrated security services combine mechanical security, such as closed-circuit TV monitoring and access control systems, with personnel security. Only companies that meet certain requirements, including having security personnel, capital, and facilities, and are approved by the local police, can participate in the bidding.

The Fair Trade Commission deemed the collusion a serious violation of laws that restricted competition in bidding for security services funded by apartment residents' management fees. It imposed fines of 641 million won on S1 and 332 million won on S-Tech Systems, with the final amounts subject to adjustment.

A Fair Trade Commission official stated, "We have significantly raised the minimum fines and criteria for imposing penalties for recent bid rigging and unfair joint actions. We plan to take stricter measures if similar violations are detected in the future."