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Newsletter | August 2015, Issue 2
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Litigation
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Price Fixing - The Supreme Court clarifies standards for determining the “Completion Date” in collusion cases
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The Supreme Court recently addressed the issue of determining the “completion date” of a collusion, in a case involving power cable manufacturers who supplied products pursuant to a pre-agreed internal allocation scheme for a substantial period of time following the collusion agreement. This decision is significant because it provides clarification on how to determine the completion date of price fixing in similar annual unit price contracts.
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The Supreme Court found that power cable makers who participated in the annual tenders by the Korea Electric Power Corporation (“KEPCO”), for the supply of power cables from 1998 to 2012, had colluded on tender prices, the winning tenderer (i.e., the primary contracting party), and the allocation of awarded supplies with the other participants. The collusive act concerned the so-called “annual unit price contracts,” where the winning tenderer would be expected to supply products to the purchaser (i.e., KEPCO) from time to time throughout the year, at the price and the expected total volume set forth in the contract signed with the winning tenderer. In the case at hand, , the winning tenderer allocated the volume requested by KEPCO to the other participants throughout the year, in accordance with pre-agreed internal allocation ratios.
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The collusive act took place around the time the maximum basic rate for administrative fines was raised from 5% to 10% through the amended provisions of the Enforcement Decree of the Monopoly Regulation and Fair Trade Act, and the Public Notification of the Criteria for Imposition of Administrative Fines. Thus, depending on the completion date of the collusion, the applicable maximum basic rate for the administrative fines could be 5% or 10%.
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Prior to this case, the Supreme Court was of the view that the completion date of an unfair collusive act should be the end date of the performance of acts based on the collusive agreement, rather than the date on which the collusive agreement was made. However, there had been no clear precedent addressing the issue of completion dates where the supply of products continued for a period of time after the date of the collusion agreement.
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The appeals courts and the Korea Fair Trade Commission (the “KFTC”) were of the view that the allocation of products among participant manufacturers should also be considered a performance of an act based on the collusion agreement, and held that the completion date should be the final date on which the volumes ordered by KEPCO were allocated among the participants per the agreement.
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On appeal to the Supreme Court, Kim & Chang focused on: (1) the distinctive nature of the tenders of this case and the nature of the annual unit price contracts; and (2) the anti-competitive effects arising from the collusion, and argued that since the price, the parties to the transaction, and the volumes to be allocated were all effectively determined at the time the winning bidder signed the contract with KEPCO, that the subsequent allocation of volume was merely an internal division resulting from the collusion. On this basis, Kim & Chang argued that the nature of anti-competitive effects of the collusion in question should be evaluated differently.
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The Supreme Court accepted such argument, and ruled that the completion date of the collusion should be the date on which the final contract was signed between KEPCO and the final winning bidder.
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