The Fair Trade Commission on Thursday ordered the city of Iwamisawa in Hokkaido to take action aimed at curbing its excessive involvement in city-sponsored public works projects.

The directive marks the first time for the monopoly watchdog to invoke a new law that bans municipalities from helping to rig bids. The law in question took effect Jan. 6.

The FTC also ordered 126 firms involved in bid-rigging activities to disband their cartel, as it violates the Antimonopoly Law, sources close to the case said.

It called, moreover, on two construction industry bodies based in the city to take corrective action, as former city officials hired by the entities after leaving the municipal government were also involved in bid-rigging activities.

In May, the FTC searched the city hall and the offices of local construction firms in connection with the case.

The city said it would take steps to prevent a recurrence, stating that it would review its internal rules and set up a new independent body tasked with monitoring public works bidding procedures.

Iwamisawa Mayor Koichi Watanabe told a news conference Thursday that the city would review past practices from scratch so as to prevent a recurrence.

"I apologize to the residents of the city," he said.

Watanabe's predecessor, Kuniyuki Nose, was rumored to have been involved in the bid-rigging activities, but Deputy Mayor Kazuo Masuko, who was also at the news conference, said he feels the former mayor need not be called in for questioning under current circumstances.

Regarding whether city employees involved in bid-rigging should be punished, Watanabe said the matter would be discussed by an in-house investigation team that has been set up to probe the issue.

The city added that the firms cautioned by the FTC would not be eligible to bid for future projects.