[2] Whether the Fair Trade Commission may determine “standards for calculation of penalty surcharges” for each violation of the Act on Fair Transactions in Large Franchise and Retail Business at reasonable discretion (affirmative), and the method of determining “standards for calculation of penalty surcharges” for each violation

[2] In light of the main text of Article 35(1) and the former part of Article 35(2) of the Act on Fair Transactions in Large Franchise and Retail Business (hereinafter “Large Franchise and Retail Business Act”), and the contents, structure, and purport of Article 28(1) and (2) of the Enforcement Decree of the Act on Fair Transactions in Large Franchise and Retail Business, the Act on Large Franchise and Retail Business only sets the upper limit of penalty surcharges for each offense, and the “standards for calculating penalty surcharges for each offense” can be deemed that the Fair Trade Commission determines the amount of penalty surcharges for each offense at reasonable discretion. However, even if such discretion is recognized, the “standards for calculating penalty surcharges for each offense” should be reasonably determined by comprehensively taking into account the legislative purpose of the Act on Large Franchise and Retail Business, the unique nature and purpose of each offense, the purport and purpose of sanctions, the difficulty in calculating penalty surcharges, and the relationship between the upper limit of penalty surcharges imposed under the Act and its subordinate statutes.

1. Regarding ground of appeal No. 1

A. As to the Plaintiff’s superior position in transaction

The lower court, on the grounds indicated in its reasoning, determined that the Plaintiff was in a superior position in transactions with respect to 35 suppliers (hereinafter “instant suppliers”) located in the Plaintiff’s department store during the period from January 1, 2012 to May 20, 2012.

Examining the relevant legal principles and records, such determination by the lower court is justifiable. In so doing, it did not err by misapprehending the legal doctrine regarding the superior position in the transaction, or by exceeding the bounds of the principle of free evaluation of

B. As to the recognition of illegality

(1) Article 14(1) of the Act on Fair Transactions in Large Franchise and Retail Business (hereinafter “Large Franchise and Retail Business Act”) provides that a large franchise and retail business operator may not unfairly require a supplier, etc. to provide management information under each subparagraph of paragraph (1). This purpose is to ensure that a large franchise and retail business operator may establish a fair transaction order in a large franchise and retail business and develop a complementary transaction between a large franchise and retail business operator and a supplier on an equal basis by preventing a large franchise and retail business operator from entering into a subsequent unfair transaction under certain conditions by taking into account the circumstances that if a large franchise and retail business operator requests a supplier, etc. and is provided with management information under each subparagraph of paragraph (1), such management information may be used in a subsequent unfair transaction of a large franchise and retail business operator and restrict fair and free transaction order.

In light of the language and purport of Article 14(1) of the Act on Large Franchise and Retail Business, “unfair” required in the act of demanding the provision of management information prohibited under Article 14(1) of the said Act means a case where the required act goes beyond normal transaction practices and is deemed to be beyond normal transaction practices and is likely to impede fair trade, taking into account such various circumstances as the situation of the market where the relevant party is faced, the characteristics of the goods subject to transaction, the intent of requesting the provision of management information, circumstances, the purpose, purpose, effect, impact, and the form of specific demands, the details and scope of the requested information, the details and degree of disadvantage that the other party in receipt of the request for the provision of management information may receive or receive when the requested party does not respond to such request, the degree of superior position in the market of the relevant business operator, and the gap in business ability between the relevant parties.

(2) During the period from January 1, 2012 to May 20, 2012, the lower court determined that the Plaintiff’s act of demanding the instant supplier’s 60 brands sold by the Plaintiff (hereinafter “instant brand”) was conducted on the Plaintiff’s corporate level by verbal or e-mail for a specific period of time (hereinafter “instant demand”) and that the instant supplier’s provision of the instant brand sales data could not be denied the Plaintiff’s demand in a superior transaction position, taking into account the following: (a) the Plaintiff’s act of demanding the instant supplier’s 60 brands sold by the Plaintiff (hereinafter “instant brand”) goes beyond normal transaction practices; and (b) the Plaintiff’s provision of the instant brand sales data to the Plaintiff, despite the absence of any special circumstance to voluntarily provide, could not be denied the Plaintiff’s demand; and (c) thus, the Plaintiff’s act of demanding was likely to infringe or be likely to infringe on the basis of a fair trade practice.

(3) In light of the following circumstances revealed in the reasoning of the lower judgment in light of the aforementioned legal principles and records, i.e., (i) the Plaintiff’s management information on sales data, etc. at other department stores in competition with the Plaintiff, which is likely to be used by the Plaintiff for the Plaintiff’s interest in the future transaction on department stores; (ii) even if the Plaintiff’s necessity for market research is acknowledged, it is difficult to deem that the Plaintiff’s demand for information, etc. on sales data, etc. is a method necessary to require the supplier to be provided; and (iii) the Plaintiff’s demand for information in this case was necessary for the improvement of transaction relations between the Plaintiff and the instant supplier. In so doing, the lower court’s aforementioned determination is justifiable. In so doing, it did not err by misapprehending the legal doctrine on the illegality of Article

2. Regarding ground of appeal No. 2

A. As to whether the imposition of a penalty surcharge itself is illegal

Based on its stated reasoning, the lower court determined that the Defendant’s imposition of a penalty surcharge against the Plaintiff cannot be deemed unlawful, on the grounds that it could not be deemed sufficient to achieve the purpose of the sanction, even for less infringing corrective measures than the imposition of the penalty surcharge in this case.

Examining the relevant legal principles and records, such determination by the lower court is justifiable. In so doing, it did not err by misapprehending the legal doctrine on deviation and abuse of discretion in the imposition of penalty surcharges.

B. As to the method of calculating penalty surcharges

(1) The Act on Fair Transactions in Large Franchise and Retail Business grants the authority to impose penalty surcharges on the Defendant for the legislative purpose of establishing a fair trading order and ensuring that large franchise and retail business operators, suppliers, or sales floor tenants can develop mutually on an equal footing. Accordingly, Article 35 of the Act on Fair Transactions in Large Franchise and Retail Business provides that the Fair Trade Commission shall impose penalty surcharges on the violator within the scope not exceeding the amount of supplied goods according to the calculation method prescribed by Presidential Decree or annual rents (main sentence of paragraph (1)), and that each violation is calculated (former part of paragraph (2)). In addition, Article 28(1) of the Enforcement Decree of the Act on Fair Transactions in Large Franchise and Retail Business (hereinafter “Enforcement Decree of the Act on Fair Transactions in Large Franchise and Retail Business”) provides that “The amount of supplied goods according to the calculation method prescribed by Presidential Decree” refers to the purchase amount of related goods purchased by the relevant large franchise and retail business operator during the period of a violation or the amount equivalent thereto. In addition, Article 35(2) of the Act provides that matters necessary for the imposition of penalty surcharges shall be publicly announced.

In light of the contents, structure, and purport of the relevant statutes, the Act on Large Franchise and Retail Business sets the upper limit of penalty surcharges for each violation, and the “standards for calculation of penalty surcharges for each violation” can be deemed that the Fair Trade Commission can determine the amount of penalty surcharges at a reasonable discretion. However, even if such discretion is recognized, the “standards for calculation of penalty surcharges for each violation” should be reasonably determined by comprehensively taking into account the following: (a) the legislative purpose of the Act on Large Franchise and Retail Business; (b) the period and frequency of the violation; (c) the size of profits acquired from the violation; (d) the characteristics and nature of each violation; (d) the purpose and purpose of

(2) The lower court determined that the Defendant’s measure of calculating the instant penalty surcharge was lawful on the basis of the deeming that the amount supplied by the instant supplier to the Plaintiff and the Plaintiff sales rent of the supplier that received the said demand, as the goods directly or indirectly affected by the instant request, as the basis for calculation of penalty surcharges.

(3) However, in light of the aforementioned legal principles, the lower court’s determination is difficult to accept for the following reasons.

① The main purpose of Article 14 of the Act on Large Franchise and Retail Business is to prevent suppliers from being in a position of more heat in a position in a transactional relationship and establish a fair trading order in a large franchise and retail business by preventing large franchise and retail business operators from demanding information about costs of suppliers or management information that is difficult to understand in a transactional relationship, such as terms and conditions of transaction, by taking advantage of a superior position in a transaction.

(2) The core point of the possibility of criticism for the act of demanding the provision of management information lies in the act of demanding information by unfairly using the difference of power. Accordingly, when establishing a “standards for calculation of penalty surcharges” as the primary standard for imposing sanctions, it is reasonable to consider the core indices indicating the degree of illegality, such as how much he/she abused his/her position in trade, how much he/she has obtained, how to demand it, details and quantity of information acquired through the use of trade relations, and the frequency and period of violations.

(3) In this respect, a violation of Article 14 of the Large Franchise and Retail Business Act is distinguishable from cases where unfair practices using superior position are involved in the transaction relationship between large franchise and retail business operators and suppliers, such as reducing the price of goods (Article 7). As to the act of reducing the price of goods, “the scale of transaction involving a violation, such as the purchase amount of goods directly or indirectly affected by the violation,” should be determined based on the calculation of the penalty surcharge, and it can also be deemed reasonable to determine the sanction level. However, the same standard is not applicable to the act of demanding the provision of management information, which is an illegal act, which is based on the transaction relationship. Even if the amount of profit acquired by the act of demanding the provision of management information is not high, the illegality level may not be lowered depending on the content of the information, the frequency of the violation

④ Therefore, the “scale of a large franchise and retail business operator who purchased a product affected by a violation from a supplier” cannot be deemed reasonable as “standards for calculation of penalty surcharges” in which at least the first determination of the level of sanctions for requesting the provision of management information is made. In addition, whether a large franchise and retail business operator obtained unjust profits in the distribution market using the management information illegally acquired by the large franchise and retail business operator or violated additional Acts and subordinate statutes is merely

⑤ Examining these premises, the former Public Notice of Standards for Imposition of Penalty Surcharges (amended by the Fair Trade Commission Notice No. 2014-11, Nov. 27, 2014); and the former Public Notice of the Detailed Standards for Imposition of Penalty Surcharges (amended by the Fair Trade Commission Notice No. 2012-6, Mar. 28, 2012) that stipulate “the purchase amount of products directly or indirectly affected by a violation” as the standard for calculation of penalty surcharges for requesting the provision of management information is unreasonable.

6. Ultimately, the instant penalty surcharge imposed in accordance with the calculation standard of penalty surcharges that cannot be deemed reasonable in itself is unlawful as it deviates from and abused discretion.

(4) Nevertheless, the lower court determined otherwise that the Defendant’s imposition of the instant penalty surcharge was lawful. In so determining, the lower court erred by misapprehending the legal doctrine on the rationality of setting the standards for imposing penalty surcharges, and deviation and abuse of discretion in imposing penalty surcharges, thereby adversely affecting the conclusion

3. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices

Justices Cho Jae-chul (Presiding Justice)