[2] In a case where 13 construction companies, including Gap corporation, etc., determined the successful bidder and bid bid rate by construction work in advance while participating in a bid for LNG storage tank construction, agreed to allocate construction volume to other construction companies included in the successful bid bid agreement, and the Fair Trade Commission calculated a penalty surcharge to impose a penalty surcharge to impose a penalty surcharge to the effect that the act of participating in the bidding constitutes an "unfair collaborative act" under Article 19 (1) 3 and 8 of the former Monopoly Regulation and Fair Trade Act, the case holding that the Fair Trade Commission may not impose a penalty surcharge within the scope of N-2 of the N-2 of the former Enforcement Decree of the Penalty Surcharge if the number of construction companies is more than five, and N refers to the number of construction companies, and the Fair Trade Commission decided to impose a penalty surcharge to the N-TA by deeming that the aforementioned act of participating in the bidding at the pre-determined bid agreement constitutes a "unfair collaborative act" under Article 19 (1) 3 and 8 of the former Monopoly Regulation and Fair Trade Act

[3] Whether the imposition of a penalty surcharge by applying the criteria set by the Fair Trade Commission as to the method of applying the reduction rate for each reason for the adjustment of the imposition of a penalty surcharge is unlawful (negative in principle), and where the imposition of a penalty surcharge is illegal as a deviation or abuse of

[4] Criteria for determining whether a person who voluntarily reported an unfair collaborative act or cooperates in an investigation by means of providing evidence, etc. / In a case where a series of agreements among enterprisers can be seen as a single unfair collaborative act, among the enterprisers participating in an unfair collaborative act, the first voluntary reporter under Article 35(1) of the former Monopoly Regulation and Fair Trade Act or the first investigator or cooperator under Article 35(1) of the former Monopoly Regulation and Fair Trade Act

1. Whether the imposition of penalty surcharge is illegal;

A. Whether the applicable legal provisions are erroneous

(1) Article 19(1) of the Monopoly Regulation and Fair Trade Act (hereinafter “Fair Trade Act”) provides that a business entity shall not agree with another business entity to jointly engage in, or cause another business entity to engage in, any of the following acts that unfairly restrict competition (hereinafter “unfair collaborative act”) by means of a contract, agreement, resolution, or any other method. In addition, Article 19(1) of the same Act provides that “the act of restricting the production, delivery, transportation, or transaction of goods or the transaction of services” under subparagraph 3 of the prohibited act type, and subparagraph 8 of the same Article provides that “the act of determining successful bidder, successful bidder, bid price, bid price, successful bid price or bid price in bidding or auction, or other matters prescribed by the Presidential Decree.”

Where a bid is conducted for each construction section with respect to a construction project, if an agreement is reached in advance to select a successful bidder for each construction section to restrict the transaction of goods or services (hereinafter referred to as “agreement on the distribution of construction sections”), a collaborative act prescribed in Article 19(1)3 of the Fair Trade Act shall also be deemed established in addition to the establishment of a collaborative act prescribed in Article 19(1)3 of the Fair Trade Act. In addition, even if an agreement on the distribution of construction sections was made to select a successful bidder for a specific construction section according to the agreement on the distribution of construction sections, the collaborative act prescribed in Article 19(1)8 of the Fair Trade Act shall also be deemed to be also established. In addition, even if the construction section was selected as a successful bidder for a specific construction section, it is necessary for another business operator to formally participate in the tender in order to prevent a mis

In full view of the aforementioned circumstances and the forms, contents, and structure of the relevant provisions regarding the types of unfair collaborative acts as seen earlier and the grounds for imposing penalty surcharges therefor, in cases where an enterpriser who participated in the agreement on the allocation of construction sections agrees to formally participate in the bidding of construction sections that other enterprisers agreed to receive the allocation of construction sections, such agreement constitutes an unfair collaborative act independent from the agreement on the allocation of construction sections, barring special circumstances, and thus, it shall be deemed that separate penalty surcharges may be imposed thereon (see Supreme Court Decision 2016Du32688, Apr. 26, 2017).

(2) The lower court determined that the instant collaborative act is an act of allocating successful bidders for each construction section and setting a bid bid rate in advance to prevent the lower successful bidder’s bid price through competition, and thus, Article 19(1)3 and 8 of the Fair Trade Act is all applicable, and it is difficult to recognize that other Defendant’s administrative practices have been established.

(3) Such determination by the court below is in accordance with the legal principles as seen earlier. In so doing, it did not err by misapprehending the legal principles on the applicable legal provisions on unfair collaborative acts and the principle of self-regulation in administration.

B. Whether the criteria, etc. for calculation of penalty surcharges for tools participating in Russia are unlawful

(1) Comprehensively considering the provisions of Articles 6 and 22 of the Fair Trade Act, the Fair Trade Commission has discretion to determine whether to impose penalty surcharges on violations of the Fair Trade Act and, if imposing penalty surcharges, to determine the amount of penalty surcharges specifically within a certain extent prescribed by the Fair Trade Act and the Enforcement Decree of the Monopoly Regulation and Fair Trade Act (hereinafter “Enforcement Decree of the Fair Trade Act”). Provided, That if there are grounds, such as misconceptions of the facts that form the basis for imposing penalty surcharges while exercising the discretion, or contravenes the principle of proportionality and equality, such circumstance is an deviation or abuse of discretionary power (see, e.g., Supreme Court Decision 2009Du15005, Sept. 8, 201).

(2) According to the language and text of Articles 9(1) and 61(1) [Attachment 2] [Attachment 2] 2.A. 3] of the Enforcement Decree of the Fair Trade Act, with respect to “tender collusion and acts similar thereto”, the amount calculated by multiplying the “contractual amount” by 10/100 shall not be the upper limit of penalty surcharges, and the said “contractual amount” shall be deemed the basic standard for calculation of penalty surcharges (see, e.g., Supreme Court Decision 2016Du3360, Apr. 27, 2017).

Meanwhile, the former Public Notice on the Imposition, etc. of Penalty Surcharges (amended by the Fair Trade Commission Notice No. 2016-22, Dec. 30, 2016; hereinafter “Public Notice on Penalty Surcharges”) amended on Oct. 7, 2015 provides that “If the number of business entities is more than five, the standards for calculation may be reduced within the limit of N-2, and N refers to the number of business entities.”

In light of the aforementioned forms and contents, the provision regarding the notice of penalty surcharges is a discretionary rule, i.e., the administrative agency’s internal rules on administrative affairs, established as the basis of the exercise of discretion regarding the calculation of penalty surcharges and the imposition thereof, and setting the criteria for the calculation and imposition thereof belongs to the discretion of the administrative agency, so long as it is not deemed that the criteria are inconsistent with the Constitution or laws or that the administrative agency abused discretion because they cannot be objectively reasonable, the administrative agency’s intent should be respected as far as possible. Such discretionary rules generally have the effect only within the administrative organization, not external binding force, and are not immediately illegal merely because they violated administrative disposition. However, if administrative practices are conducted after the enforcement of the rules on discretion, the administrative agency is subject to self-regulation in relation to the other party in accordance with the principle of equality or the principle of trust protection, barring any special circumstance, a disposition contrary thereto is unlawful and abused against the principle of equality or the principle of trust protection (see, e.g., Supreme Court Decision 2013Du18381, Nov. 14, 2013).

(3) The lower court determined that the Defendant’s action was lawful to include the Plaintiff’s contract amount of construction sections in which the Plaintiff participated in the bidding collusion’s basic calculation criteria for the penalty surcharge of the instant collaborative act. Furthermore, the lower court determined that the Defendant did not have reasonable grounds for determining that the Defendant was the number of joint contractors of the penalty surcharge notice, or that there was deviation or abuse of discretionary power, taking into account the following: (a) the fact that there is no possibility of mutual competition within the single joint contractors; (b) the joint contractors in the bidding practice are calculated as a single competitor entity; and (c) the intent of the amendment of the public notice of penalty surcharge notice

(4) Such determination by the lower court is in accordance with the legal doctrine as seen earlier. In so doing, it did not err by misapprehending the legal doctrine on the standard of calculation of penalty surcharges.

C. Whether the imposition standard rate is illegal

(1) The lower court determined that there was no violation of the principle of proportionality and equality in the Defendant’s measures that applied the Plaintiff’s imposition standard rate of 7% to the Plaintiff, taking into account the following: (a) the instant collaborative act did not constitute a violation of the principle of proportionality and equality, taking into account the following: (b) the business entities participating in the tendering procedure for public project; (c) the effect of restricting competition is apparent as a bidding collusion that agreed upon in advance to determine the successful bidder for each construction section; and (d) the Plaintiff participated in the instant collaborative act and made a more public announcement of the instant collaborative act with the Plaintiff, which

(2) Examining the relevant legal principles and records, the lower court did not err by misapprehending the legal doctrine on deviation and abuse of discretionary authority in calculating the imposition standard rate.

D. Whether it is illegal to increase the frequency of violation

(1) Article 55-3(1) of the Fair Trade Act provides that the Fair Trade Commission shall impose a penalty surcharge in consideration of the period and frequency of a violation (Article 55-3(1)). Article 61(1) [Attachment 2] [Attachment 2] of the Enforcement Decree of the Fair Trade Act upon delegation by Article 55-3(5) of the Fair Trade Act, considering the period and frequency of a violation, shall be adjusted in accordance with the standards determined and publicly notified by the Fair Trade Commission within 50/100 of the standards for calculation. Based on such provision, the former Public Notice on the Specific Criteria for Imposition of Penalty Surcharges (amended by Notice of the Fair Trade Commission No. 2012-25, Aug. 20, 2012) (Article 55-3(1) of the Fair Trade Act (amended by the Fair Trade Commission Notice No. 2012-25, Aug. 20, 201).

As seen earlier, the Fair Trade Commission’s imposition of a penalty surcharge against a legal violator is discretionary, and whether the past record of the violation is reflected in the amount of a penalty surcharge, and if reflected, to which extent the amount of a penalty surcharge is to be reflected belongs to the discretion of the Fair Trade Commission. Therefore, the standard for considering the records of the violation applied while imposing a penalty surcharge is unreasonable or arbitrary, and the imposition of a penalty surcharge based on such standard is not erroneous or arbitrary, and is contrary to the principle of proportionality and equality, it is difficult to deem that the imposition of a penalty surcharge is an unlawful act of deviating from or abusing the discretionary authority.

(2) The lower court determined that there was no deviation from or abuse of the Defendant’s discretionary authority on the grounds that the Defendant issued a suspicion against the Plaintiff only through on-site investigation, bidding status, and documentary evidence analysis with respect to other enterprisers participating in the bidding, and on June 4, 2015, sent the Plaintiff a written notice of an order to submit data, etc. to the Plaintiff on the grounds that: (a) around June 4, 2015, the lower court did not deviate from or abuse of the Defendant’s discretionary authority to the Plaintiff

(3) Such determination by the lower court is based on the legal doctrine as seen earlier, and contrary to what is alleged in the grounds of appeal, there were no errors by misapprehending the legal doctrine on the interpretation and application of “the base date for increasing the frequency of violations.”

E. Whether the calculation method of penalty surcharges is unlawful

(1) Article 61(1) and 61(1) [Attachment 2] d. 1 of the Enforcement Decree of the Fair Trade Act provides that “If it is deemed that a violation enterpriser’s actual ability to bear the expenses or its violation affects the market, the effect of the violation on the market, or the scale of profits acquired by the violation pursuant to Article 5-3(1)3 of the Act, is excessive due to the failure of the market or economic situation, the amount of profits acquired by the violation may be reduced by up to 50/100 of the amount of the second adjusted calculation standards, and the penalty surcharge may be imposed.” In addition, the second adjusted calculation standards based on Article 61(1), (3), and [Attachment 2] of the Enforcement Decree of the Fair Trade Act, the Fair Trade Commission provides that “if the second adjusted calculation standards reflects the special financial situation of the violator enterpriser, or the actual ability reflecting the market and economic conditions, the effect of the violation on the market and the amount of profits acquired by the violation may be adjusted by specifying the reasons for the second adjustment in the resolution and adjustment standards, etc.”

(2) However, the notice of penalty surcharge IV. 4. A. (1) and (2) merely stipulate the grounds for, and the rate of mitigation of, the second adjusted calculation standards when calculating the penalty surcharge through the second adjustment. In the calculation of the penalty surcharge, there is no specific provision regarding whether to apply the reduction rate in whole or in part according to the grounds for each adjustment in the calculation of the penalty surcharge, and whether the reduction rate can be applied gradually. This is necessary to set the standards by comprehensively taking into account the legislative intent of the system of penalty surcharge and the system of mitigation, such as realization of restrictive effects, the application of the reduction rate, and the need to prevent abuse of the reduction rate, and the public interest purpose, and it is not immediately derived from the language and text of the relevant statutes and the notice of the penalty surcharge.

In addition to these circumstances, determination of mitigation and mitigation rate is subject to the discretion of the Fair Trade Commission and it also has discretion to determine internal administrative rules on it. Considering that there is no specific provision on the application method of mitigation rate by reason of adjustment in the phase of imposing penalty surcharges, the Fair Trade Commission does not go against the legislative intent of the penalty surcharge system and mitigation system and does not unreasonable or arbitrary. Furthermore, it is difficult to deem that there is an error of deviation and abuse of discretionary power in imposing penalty surcharges, unless there is a misunderstanding that the criteria applied while imposing penalty surcharges are in the process of imposing penalty surcharges, or there is no reason contrary to the principle of proportionality and equality.

(3) The lower court determined that the instant disposition cannot be deemed to violate the principle of self-regulation in administration (the principle of equality) and the principle of proportionality, on the grounds that the Defendant’s application of the reduction rate was arbitrary or it is difficult to deem that there was an abuse of discretion in the method of application of the reduction rate, and that it is difficult to recognize the existence of other administrative practices.

(4) Such determination by the lower court is based on the legal doctrine as seen earlier. In so doing, contrary to what is alleged in the grounds of appeal, the lower court did not err by misapprehending the legal doctrine regarding the principle of self-determination of administration or by exceeding the bounds

2. Whether an application for reduction or exemption is illegal;

(3) Article 22-2 of the former Monopoly Regulation and Fair Trade Act (amended by Act No. 14137, Mar. 29, 2016) provides that corrective measures or penalty surcharges may be mitigated or exempted for a person who voluntarily reported the fact of unfair collaborative acts (hereinafter referred to as "self-declaration of unfair collaborative acts") or a person who cooperates in an investigation by means of provision of evidence, etc. (hereinafter referred to as "investigation cooperator"), and Paragraph (3) of the same Article provides that detailed matters concerning the scope of persons eligible for mitigation or exemption or exemption and the standards for mitigation or exemption and degree of such reduction or exemption shall be prescribed by Presidential Decree (Article 4 of the current Act provides the same as those of paragraph (3) of the same Article). Article 35 (1) 1 through 3 of the Enforcement Decree of the Fair Trade Act, which provides standards for mitigation or exemption for a voluntary reporter of unfair collaborative acts (hereinafter referred to as "self-declaration, etc."), and Article 35 (1) 1 through 275 of the Enforcement Decree of the Fair Trade Act provides that he/she has voluntarily reported or provided materials related to the unfair collaborative acts.

Considering the purport and purpose of the system, such as voluntary reporters, etc., and the fact that an enterpriser who has participated in an unfair collaborative act voluntarily reports or cooperates in an investigation to provide evidential data, and thereby undermining trust among participating enterprisers to discontinue or prevent an unfair collaborative act, it shall be based on the degree of contribution to the possibility of detection of the unfair collaborative act by the enterpriser concerned in making a decision as to whether the voluntary reporters, etc. fall under reduction or exemption and the order of reduction or exemption (see Supreme Court Decision 2009Du15005, Sept. 8, 2011). Meanwhile, in cases where a series of agreements among participating enterprisers can be seen as a single unfair collaborative act, only the first participating enterpriser who has provided evidence necessary to prove the unfair collaborative act among those participating in the unfair collaborative act falls under the requirements for reduction or exemption of Article 35(1)1 of the Enforcement Decree of the Fair Trade Act (see Supreme Court Decision 201Du2815, Jun. 30, 2015).

B. The lower court determined that the Defendant’s measure was not unlawful on the ground that the Plaintiff’s fourth application for reduction or exemption was illegal on the premise that whether the instant collaborative act constitutes a voluntary reporter, etc. as a whole as a single unfair collaborative act should be determined on the basis of the entire collaborative act, and that the Defendant’s measure cannot be deemed unlawful on the ground that the Plaintiff’s first or second voluntary reporter, etc. met the requirements for reduction or exemption, such as the first or second voluntary reporter of the instant collaborative act.

C. Such determination by the lower court is based on the legal doctrine as seen earlier, and it did not err by misapprehending the legal doctrine on the requirements for exemption from voluntary reporters.

3. Conclusion

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Ahn Jae-chul (Presiding Justice)