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Newsletter | May 2014, Issue 2
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LITIGATION |
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Win for Soju Companies in Recent Supreme Court Decision on “Unlawful Concerted Acts” under the Monopoly Regulation and Fair Trade Law |
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The Korean Supreme Court recently issued a significant decision that clarified the meaning of “unlawful concerted acts” under Article 19 (1) of the Monopoly Regulation and Fair Trade Law (“Fair Trade Law”). |
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The case involved alleged unlawful collusive behavior by the producers of the traditional Korean distilled alcohol beverage soju in raising the price of their product. The Korea Fair Trade Commission (“KFTC”) had ruled that the soju companies had engaged in “unlawful concerted acts” and had imposed fines, which the soju companies had appealed to the Seoul High Court. The Seoul High Court confirmed the KFTC’s decision. |
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On further appeal, the Supreme Court disagreed. While the Supreme Court confirmed its prior position that the agreement that unlawfully restrict competition for purposes of Article 19 can be either express or implied, the Court also emphasized the initial requirement for “an agreement” between the companies which, according to the Court, necessarily called for “communication between two or more companies.” According to the Court, the mere fact that there were acts which on the outside appeared to be one or more of the presumptively unlawful acts listed in Article 19 of the Fair Trae Law should not be taken as conclusive evidence that there was an agreement between the parties “unless there was evidence showing inter-dependent and related communication between the companies.” The Supreme Court also confirmed that it is the KFTC that has the burden of proving that such interdependent communication in fact took place. |
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The decision is significant because the Supreme Court apparently applied a stricter standard for the finding of “an agreement” for anti-competitive conduct when the parties were able to offer a plausible alternative explanation for parallel conduct that otherwise appeared to be the result of collusive behavior. The Supreme Court declined to infer an agreement to fix prices amongst the soju producers because in this case, the National Tax Service had restricted the leading soju producer’s ability to increases prices (to levels below the rate of inflation), and the Court found it plausible that under such circumstances, the other producers had no choice but to limit their price increases up to the levels approved by the National Tax Service. Accordingly, the Court ruled that there was insufficient evidence of unlawful price-fixing agreement despite the fact that there had been meetings by the chief executive officers of the soju producers, which are typically regarded to be a venue for discussing prices, and price increase related information had been exchanged amongst the various producers. Thus, the decision indicates that even in the presence of facts that create a presumption of collusion under Article 19 of the Fair Trade Law, such presumption can be overcome by evidence of plausible alternative explanations. |
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Kim & Chang served as lead counsel for the soju producers from the KFTC investigation stage through all related appeals and in the successful outcome at the Supreme Court. |
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