[1] The method of determining whether a collaborative act constitutes “competitive competition” as provided by Article 19(1) of the Monopoly Regulation and Fair Trade Act, and the method of determining whether a collaborative act also has competition-restricted effect in a case where the collaborative act causes competition-restricting effect as well as competition-restricting effect

[2] In a case where Gap corporation, a drug wholesaler, agreed with six drug wholesalers and other drug wholesalers who had been awarded a contract with Eul University Hospital, to purchase drugs according to the bid price at another wholesaler who had been engaged in the transaction with the existing pharmacist, and to transfer the price at the hospital to the relevant wholesaler according to the bid price, the case holding that the above agreement unfairly restricted competition in the bid market

[1] Whether a collaborative act restricts competition should be determined by taking into account various circumstances such as the characteristics of the pertinent product, consumers’ standard for choosing products, impact of the pertinent act on the competition of markets and enterprisers, and by examining whether the pertinent collaborative act affects or is likely to affect the determination of price, quantity, quality, other terms and conditions of trading, etc. by reducing competition in a particular business area.

On the other hand, if the collaborative act concurrently leads to the effect of restricting competition as well as the effect of promoting competition, it should be determined by comparing and balancing the two. Here, considering the contents of the collaborative act, the market share of the enterprisers involved in the collaborative act, the degree of competition restriction among the participating enterprisers, etc., the effect of promoting competition should be comprehensively taken into account, such as the effect of increasing efficiency, such as the reduction of all costs arising from the collaborative act, the increase in consumer welfare, etc., and the following should be comprehensively taken into account; however, whether the collaborative act is necessary

[2] In a case where Gap corporation, a drug wholesaler, agreed with six drug wholesalers and six drug wholesalers on the following day after the bidding price of Eul University University Hospital, and a successful wholesaler, a successful bidder, purchased drugs according to the bid price at another wholesaler which had been engaged in a transaction with the existing pharmaceutical company, and received the price at the hospital, he shall transfer the amount according to the bid price at the hospital, the case affirming the judgment of the court below which held that the agreement of the court below was more unfair competition-restricting factors in the bidding market on the ground that even the wholesaler who did not receive the bid price by the agreement can deliver the drugs by wholesale transaction according to the successful bid price and the successful bid price, even if he did not participate in the bidding, he can be deemed as having actually status as a successful bidder and can not be seen as having the meaning of the selection of the successful bidder to be decided by the price competition, while it is difficult to recognize the inevitable nature of the bid price which was decided by the price competition in the bidding market on the ground that there was no agreement.

[1] Article 19(1) of the Monopoly Regulation and Fair Trade Act / [2] Article 19(1) of the Monopoly Regulation and Fair Trade Act

[1] Supreme Court Decision 2012Du19298 Decided November 14, 2013 (Gong2013Ha, 2256), Supreme Court Decision 2012Du24498 Decided February 27, 2014 (Gong2014Sang, 729), Supreme Court Decision 2012Du27794 Decided February 27, 2014

Cheongcheon Pharmaceutical Co., Ltd. (Law Firm Apex, Attorneys Park Jong-sik et al., Counsel for the defendant-appellant)

Fair Trade Commission (Law Firm spring, Attorneys Yang Jong-young et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2012Nu11234 decided December 7, 2012

All appeals are dismissed. The costs of appeal are assessed against each party.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. As to the Plaintiff’s appeal

A. As to the existence of the instant agreement

On June 13, 2006, the day following the bidding process at the ○○ University Hospital (hereinafter “○○ University Hospital”), the lower court determined that the Plaintiff agreed to purchase the drugs at the successful bid price from another wholesaler which had engaged in transactions with the previous pharmaceutical manufacturers and to transfer the price to the wholesaler at the time of receiving the price from the hospital (hereinafter “the aforementioned agreement”, and the above agreement was implemented for about one year thereafter. The lower court determined that the supply method was also subject to the bid bid at the year 2007 and 2008 (hereinafter “tender bid at the above hospital”). After recognizing that there was no significant change in the bid price at the above hospital in the year 207 and 208 (hereinafter “the bid at this case”) and comprehensively taking into account all the circumstances in the judgment, it was reasonable to deem that the agreement between the Plaintiff et al. was reached even if each of the instant agreements was reached.

Examining the reasoning of the lower judgment in light of the relevant legal principles and evidence duly admitted, the lower court’s aforementioned determination is justifiable, and did not err by exceeding the bounds of the principle of logic and experience and free evaluation of evidence.

B. As to the determination of the relevant market

In order to determine whether a collaborative act constitutes an unfair collaborative act under each subparagraph of Article 19(1) of the Monopoly Regulation and Fair Trade Act (hereinafter “Fair Trade Act”), first of all, the relevant market, which is the object of trade, shall be specifically determined in relation to a certain business area in which competition relations may arise. Considering the diversity of unfair collaborative acts, efficiency and rationality of such regulations, etc., the Defendant cannot be required to undergo empirical economic analysis when defining the relevant market. Even if the Defendant demarcated the relevant market without going through such analysis, it shall be deemed that the validity of the market definition can be recognized on the basis of the type and specific contents of the collaborative act at issue, the economic effect which can be inferred from the contents thereof, the general transaction reality of goods or services subject to the collaborative act, etc. (see Supreme Court Decision 2013Du24471, Nov. 27, 2014).

The lower court deemed the instant agreement as a bidding market for the purchase of drugs (hereinafter “the bidding market in this case”) conducted by the said hospital on the grounds that ① the purchaser specified the instant bidding as “○ University Hospital” and the subject of the transaction is limited to the group designated by the ○ University Hospital as a group; ② the successful bidder is required to supply the goods designated by the ○ University Hospital as a group and cannot select only a part of the successful bidder as a group, and thus, it cannot be replaced with individual medicine or other medicine group; ③ the competition was conducted within the bidding procedure under certain conditions, such as participation in the bid and scheduled scheduled return rate presented by the ○ University Hospital; and there is an essential difference in ordinary pharmaceutical transactions in terms of the conditions of competition.

The judgment of the court below is just in accordance with the legal principles as seen earlier, and there were no errors by misapprehending the legal principles as to the determination of related markets.

C. As to whether competition restriction exists in the bidding market of this case

(1) Article 19(1) of the Fair Trade Act prohibits “unfair collaborative act” under which an agreement is made with other enterprisers to jointly engage in an act that unfairly restricts competition, and stipulates that “any act other than those prescribed in subparagraphs 1 through 8, which practically restricts competition in a particular business area by hindering or restricting business activities or business activities of other enterprisers (including those who engaged in such act).” Furthermore, whether a collaborative act restricts competition should be determined by taking into account various circumstances, such as the characteristics of the relevant product, consumers’ standard for choosing products, impact of the relevant act on the competition between the market and the enterprisers, etc. Furthermore, whether a collaborative act causes or is likely to cause impacts on the determination of price, quantity, quality, and other terms and conditions of trading by reducing competition in a particular business area (see, e.g., Supreme Court Decisions 2012Du19298, Nov. 14, 2013; 2012Du2498, Feb. 27, 2014).

Meanwhile, in a case where the pertinent collaborative act concurrently leads to the effect of restricting competition as well as the effect of promoting competition, it should be determined by comparing and balancing the two. Here, considering the content of the collaborative act, the market share of the enterprisers who participated in the collaborative act, the degree of competition restriction among the enterprisers who participated in the collaborative act, etc., the effect of promoting competition should be comprehensively taken into account, such as the effect of increasing efficiency, such as the reduction of overall costs arising from the said collaborative act, and the increase in consumer welfare, etc., and whether such collaborative act is necessary from a reasonable point of view (see Supreme Court Decision 2012Du19298, Nov. 14, 2013).

(2) The court below determined that the agreement in this case unfairly restricted competition in the bidding market of this case on the following grounds: (a) it is difficult to recognize the restrictive effect in the bidding market of this case on the ground that the enterpriser participating in the agreement in this case can be seen as having a position as a successful bidder and thus, there is a concern that the meaning of the selection of a successful bidder which is determined by price competition will be colored; and (b) it is difficult to recognize the inevitable nature of the plaintiff et al. that the bid price rate was higher than the scheduled bid price of this case if there was no agreement in this case; and (c) it is deemed that the bid price rate was higher than the scheduled bid price of this case if there was no agreement in this case; and (d) it is difficult to deem that the circumstances asserted by the plaintiff such as the reduction of the successful bid price were caused by the agreement in this case, and thus, it cannot be deemed that the competition promotion effect by the agreement in this case is greater than the effect of restricting competition.

In light of the above legal principles and records, the judgment of the court below is just, and there are no errors in the misapprehension of legal principles regarding the establishment of an agreement on interference with and restriction on business activities, restriction on competition of unfair collaborative acts, or in violation of logical and empirical rules, thereby exceeding the bounds

D. As to procedural defects

The court below held that, unlike the review report to which Article 19 (1) 8 of the Fair Trade Act applies the provision on bidding collusion to the plaintiff who agreed in this case (hereinafter referred to as the "disposition in this case"), the defendant applied Article 19 (1) 9 of the Fair Trade Act, but did not give the plaintiff et al. an opportunity to defend against the plaintiff et al. such as statement of opinion. (1) The review report sent by the defendant et al. before the defendant's plenary session is held was written as follows: ① the plaintiff et al. decided the successful bidder before the bidding was held and agreed to supply the drugs as successful bidder after the bidding in 2006; (2) the defendant plenary session applied Article 19 (1) 9 of the Fair Trade Act only to the above two acts based on its deliberation; and (3) the plaintiff et al. merely rejected the plaintiff's specific opinion on the contract price in this case before the plenary session held the contract in this case, and it did not have any error in the agreement on the contract price in this case.

In light of relevant statutes, legal principles, and records, the judgment of the court below is just, and there is no error in the misapprehension of legal principles as to giving opportunities to state opinions and infringement of procedural right of defense under the Fair Trade

2. As to the defendant's appeal

A. As to whether the instant agreement restricts competition in the bidding market in 2006

The lower court determined that it is difficult to view that the agreement in this case was reached on the following day of the tender in 2006, and thus, it did not affect or threaten the successful bid price, etc. by reducing price competition among bidding participants in the tender in 2006.

Examining the reasoning of the lower judgment in light of the relevant legal principles and duly admitted evidence, the lower court’s aforementioned determination is justifiable, and did not err by misapprehending the legal doctrine regarding competition limitation, or by exceeding the bounds of the principle of free evaluation of evidence.

B. Regarding market definition and competition limitation on the procurement market

The lower court, on the ground that the regional scope of the successful tender offer market is “nation” and the Plaintiff’s total market share in the national pharmaceutical procurement market is about 7.4% based on the sales amount in 2009, determined that the instant agreement cannot be deemed as having the effect of restricting competition with other wholesalers than pharmaceutical manufacturers or Plaintiff, etc. in the national pharmaceutical procurement market.

Examining the reasoning of the lower judgment in light of the relevant legal principles and evidence duly admitted, it is inappropriate for the lower court to have determined the instant agreement based on the premise that the said agreement falls under the scope of interference with and restriction on business activities of pharmaceutical manufacturers or other wholesalers in the said procurement market. However, the lower court’s determination on the market definition and restriction on competition can be seen as within the scope acceptable. In so doing, it did not err by misapprehending the legal doctrine on the determination of the relevant regional market and the restriction on competition, or by exceeding

3. Conclusion

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

Justices Kim Yong-deok (Presiding Justice)