Newsletter | August 2015, Issue 2
	Antitrust & Competition
	Supreme Court renders favorable decision for Shinsegae regarding KFTC allegations of an “Unjust” affiliate transaction
	On January 29, 2015, the Supreme Court, in partially upholding the decision of the Korea Fair Trade Commission (“KFTC”) to impose corrective measures and administrative fines on Shinsegae Co. Ltd., (“Shinsegae”) for providing “unjust assistance” to an affiliate, reversed and remanded the appellate court’s decision.
	Article 23, Paragraph 1.7 of the Monopoly Regulation and Fair Trade Law (“FTL”) prohibits companies from providing certain types of “unjust assistance” to affiliated companies.  Shinsegae, which operates a variety of shopping malls (such as Shinsegae Department Store) and large discount retailers (such as E-Mart), charges a “sales commission fee” to stores located inside these shopping malls and discount markets, which are calculated using certain formulas.  The KFTC alleged that Shinsegae had provided “unjust assistance” to its affiliate. Shinsegae SVN, an operator of some of these stores, by allegedly charging such stores lower sales commission fees compared to non-Shinsegae SVN stores.  As a result, the KFTC imposed corrective measures and approximately KRW 4 billion in administrative fines on Shinsegae.
	At issue on appeal were how the “normal” sales commission rates were calculated for four different types of businesses.  The Seoul High Court had held that of the four types, the KFTC had used a faulty method for calculating the “normal” sales commission rates for three, and overturned the KFTC’s imposition of sanctions regardingthem.  However, the Seoul High Court upheld the KFTC’s calculation of the “normal” sales commission rate regarding“Day and Day,” E-mart’s in-store bakery.  With regard to Day and Day, the KFTC had calculated the “normal” sales commission rate by referring to sample sales commission rates from donuts and dumplings stores in E-Mart.
	The Supreme Court reversed the Seoul High Court’s decision to uphold the KFTC’s calculation for the “normal” sales commission rate regarding Day and Day and found that the KFTC had incorrectly calculated the rate..  Specifically, the Supreme Court held that in order to reasonably estimate what the “normal” sales commission rate is, the KFTC should have:
	Selected appropriate samples of either (i) independent transactions involving businesses opening in large discount stores and operating stores identical or similar to Day and Day, or (ii) independent transactions involving businesses that open in E-Mart and operate a business similar to Day and Day; and Based on the selection, make reasonable adjustments to account for differences between those transactions and the transaction involving Day and Day.
	However, in the Supreme Court’s view, the KFTC had failed to take such measures, rendering their conclusions about what constituted a “normal” sales commission rate for Day and Day suspect.
	Further, the Supreme Court noted that if one compares Day and Day to the donut and dumpling stores (whose sales commission rates were examined) to determine the “normal” commission rate, there are many differences, including item treatment, store size, number of employees, investment costs, sales amount, brand recognition, and attractiveness to customers.  Due to these differences, the Supreme Court found that the sales commission rates for donut and dumpling stores were not the most appropriate samples for comparison.  Even if they were appropriate comparison samples, the Supreme Court stated that the sales commission rates were not reasonably adjusted for these differences to enable a fair comparison.
	By concluding that the KFTC’s methods did not result in a fair calculation of the “normal” sales commission rate, the Supreme Court vacated the Seoul High Court’s decision and remanded the case back to the Seoul High Court.
	Kim & Chang represented Shinsegae in the appeal of this matter.
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