[1] The meaning of the latter part of Article 19(1) of the Monopoly Regulation and Fair Trade Act "act of causing another enterpriser to engage in an unfair collaborative act" and whether the "other enterpriser" here is all the enterprisers participating in the collaborative act (negative)

[2] In a case where there are special circumstances under which part of the "contract amount", which is the basic basis for calculating the penalty surcharge for bid collusion, cannot be seen as "sales amount" due to the nature of the contract amount, whether the part shall be deducted from the calculation of the contract amount (affirmative)

[1] Article 19(1) of the Monopoly Regulation and Fair Trade Act / [2] Articles 22, 55-3(1) and (5) of the Monopoly Regulation and Fair Trade Act, Articles 9(1) and 61(1) [Attachment 2] of the Enforcement Decree of the Monopoly Regulation and Fair Trade Act

[2] Supreme Court Decision 2016Du4847 Decided September 7, 2017 (Gong2017Ha, 1913)

Sung Industrial Co., Ltd. (Law Firm LLC, Attorneys Park Jong-sik et al., Counsel for the plaintiff-appellant)

Fair Trade Commission

Seoul High Court Decision 2016Nu38909 decided September 29, 2016

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

The grounds of appeal are examined.

1. Plaintiff’s ground of appeal

"Any other business entity's act of causing another business entity to engage in an unfair collaborative act" in the latter part of Article 19 (1) of the Monopoly Regulation and Fair Trade Act (hereinafter referred to as the "Fair Trade Act") refers to an act of inducing another business entity to engage in an unfair collaborative act or an act equivalent thereto (see Supreme Court Decision 2009Du1556, May 14, 2009). Here, "other business entity" subject to such an act is sufficient and is not all business entities participating in such unfair collaborative act.

After recognizing the circumstances as indicated in its holding, the lower court rejected the Plaintiff’s assertion that the Plaintiff’s proposal was a specific teachers’ act that may cause the degree of resolution to participate in the bidding of the KLLLL Investment Co., Ltd., and that the causal link between the Plaintiff’s proposal and the Plaintiff’s participation was severed.

In light of the aforementioned legal principles and evidence duly admitted, such judgment of the court below is just, and contrary to the allegations in the grounds of appeal, the court below did not err by misapprehending the legal principles on the teachers of unfair collaborative acts, or by exceeding the bounds of the principle of free evaluation of evidence.

2. As to the Defendant’s ground of appeal

A. Articles 22, 55-3(1), and 55-3(5) of the Fair Trade Act provide that a penalty surcharge may be imposed on an enterpriser who has conducted an unfair collaborative act by the Defendant within the extent not exceeding ten percent of the sales determined by the Presidential Decree (2 billion won in the absence of sales). Article 9(1) of the Enforcement Decree of the Monopoly Regulation and Fair Trade Act provides that the standard for imposing a penalty surcharge may be prescribed by the Enforcement Decree in consideration of the content and degree of the offense, duration and frequency of the offense, the size of profits acquired from the offense, etc. Upon delegation, the main text of Article 22(1) of the Enforcement Decree of the Monopoly Regulation and Fair Trade Act (hereinafter “Enforcement Decree of the Fair Trade Act”) provides that “Sales determined by the Presidential Decree” under the main sentence of Article 22(1) and (5) provides that “The standard for imposing a penalty surcharge shall be within the extent not exceeding 0 percent of the sales amount of the relevant goods or services sold in a particular business area during the violation (hereinafter “related sales amount”).” The proviso provides that the standard for imposing a penalty surcharge related to the unfair collaborative act.

According to the proviso of Article 9(1) of the Enforcement Decree of the Fair Trade Act may be deemed to have established separate standards for calculating penalty surcharges, i.e., contract amount, depending on the delegation of Article 22 and Article 55-3(1) and (5) of the Fair Trade Act. However, considering the overall structure, content, purpose, purpose, and history of the relevant statutes, the contract amount is recognized in the special form of relevant sales in light of the unique nature of the tender consultation agreement, and it does not mean that the contract amount is entirely separate concept irrelevant to the essential nature of the “sales” or “related sales.” Therefore, even in a tender consultation agreement, if some of the “contract amount”, which is the basic basis for calculating penalty surcharges, cannot be deemed to fall under the “sales amount,” it should be deducted from the calculation of the “contractual amount.”

B. Review of the reasoning of the lower judgment and the record reveals the following facts.

(1) A) The Public Procurement Service, which is an ordering entity of the PP and the tephece Construction (hereinafter collectively referred to as “each of the instant construction”) combined with the PP and the tephe Rental Construction (hereinafter referred to as “each of the instant construction”), has set the estimated amount of 16,99,00,000 won (including value-added tax) and the estimated amount of tephe Rental Construction, as KRW 19,020,000 (including value-added tax) and publicly announced each of them.

B) Each of the above bidding notices states that each of the instant construction works is subject to direct purchase of construction materials pursuant to Article 12 of the Act on the Promotion of Purchase of Small and Medium Enterprise Products and the Development of Market Support (hereinafter “Market Support Act”), and that the materials determined as subject to direct purchase shall be directly purchased and supplied by the ordering agency, and the corresponding amount shall be deducted from the contract price.

C) The Plaintiff and the Plaintiff and the Co., Ltd. respectively constituted a joint supply and demand organization, and subsequently participated in the tender for the objective second construction project by prior agreement that sets the successful bidder, etc., and the joint supply and demand organization of the Plaintiff was finally determined on July 20, 201 as agreed upon as a result of the bidding.

D) On August 5, 201, the Plaintiff Joint Supply and Demand Company entered into an initial contract for construction works with the Public Procurement Service on a contract basis of KRW 16,140,300,000 (including value-added tax) by including the details of the notice of tender for the direct purchase of construction materials as part of the terms of the contract, and entered into a contract with the Construction Management Headquarters of Daegu Metropolitan City, which is an end-user institution, on July 9, 2013 to change the contract amount to KRW 13,904,240,000 (including value-added tax) as well as the amount equivalent to the government-funded materials directly purchased and provided by the ordering entity (hereinafter “government-funded materials”).

(2) (A) Upon receipt of the Plaintiff’s proposal, Han Industrial Development Co., Ltd. and Seo-gu Co., Ltd., Ltd., upon prior agreement by the successful bidder, constituted a joint supply and demand organization, and Korea Industrial Development Co., Ltd., alone participated in the teropool risk construction tender, and as agreed upon as a result of the bid, the joint supply and demand organization (hereinafter “Seo-gu Co., Ltd”) was determined as a successful bidder on October 7, 201.

B) On March 13, 2012, the contracting party entered into the first construction contract with the Public Procurement Service with the contract amount of KRW 18,898,00,000 (including value-added tax) and subsequently entered into a contract with the Daegu Metropolitan City Construction Management Headquarters that is a procuring entity to change the contract amount to the amount obtained by deducting the amount of government-funded materials.

(3) A) In a case where a public institution places an order for a construction project, the estimated price of which is at least 2 billion won, if the estimated price of the item subject to “direct purchase” is at least 30,000 won, the item must be reflected in the design of the relevant construction project and directly purchased it (Article 12(2) and (3) of the Act on the Promotion of Purchase of Small and Medium Enterprises and Article 11(1) and (3)1 of the Enforcement Decree of the Act on the Promotion of Purchase of Small and Medium Enterprises and the Support of Development of Agricultural Products). Therefore, in principle, the government-funded materials amount should not be included in the contract amount of the construction project.

B) The tender for each of the instant construction works subject to the obligation to “direct purchase” was conducted through a package deal project for design and construction. In the design and construction package deal project method, the bidder prepared a design drawing and the bidder’s selection of the product subject to direct purchase should be based on the execution design prepared after the successful bidder was determined. As such, the Public Procurement Service, which is the ordering entity, did not specify the construction materials subject to direct purchase or exclude the amount equivalent thereto from the estimated price.

C) However, in each of the above bids, the successful bidder reflected the size, quantity, etc. of the government-funded materials in the execution of the working design, and reflected the government-funded materials in accordance with the criteria for determining the estimated price of the local government tender and the execution of the contract. The government-funded materials in accordance with the criteria for determining the estimated price of the construction works and the cost of the construction works are separately included in the cost of the construction works. However, the first contract for the construction works in this case did not specify the estimated amount of the government-funded materials in detail, and the plaintiff joint supply and demand company, the Seodaemun Joint supply and demand company, and the Public Procurement Service decided to deduct the government-funded materials from the contract amount later after concluding the contract including the contract amount.

D) Although the accounting materials of the Plaintiff et al. were not submitted directly, ① the Plaintiff joint supply and demand company did not acquire the amount equivalent to the amount of the government-funded materials, ② the ownership of the government-funded materials is held by the ordering agency, and the successful bidder, the counter-party to the contract, when surplus portion exists, can be seen as ordinary cases, and ③ the value-added tax is added to the government-funded materials amount or the above amount is not deemed to have been processed as sales under the Plaintiff’s income statement.

C. Examining these facts in light of the legal principles as seen earlier, the following is determined.

(1) Of the contract amount of each of the instant construction works executed in accordance with a package deal tender for design and construction, the part corresponding to the amount of the government-funded materials is merely a provisional nature that is naturally premised on that the amount of the government-funded materials should be deducted later from the time of the tender, and is not a final and conclusive one.

(2) In light of the fact that each of the instant construction works is subject to direct purchase of construction materials pursuant to Article 12 of the Act on the Support of Development of Agricultural and Fishing Villages, and that it was planned from the bidding stage to supply directly by the ordering entity and deduct the corresponding amount from the contract amount, it seems that the Plaintiff, the Plaintiff, and the Korea Industrial Development Company, and the Korea Industrial Development Company, also have clearly known that the amount of the government-funded materials will be deducted from the contract amount. Thus, it is difficult to view the part of the government-funded materials to be "contract amount" which the joint contractor has character as a consideration for the service provided with respect to each of the instant construction works, and it is difficult to evaluate that this part was subject to unfair collaborative act in the process of each of the instant bidding.

(3) In principle, the sales amount is determined by referring to the financial data of the enterpriser (attached Table 2]. In light of the circumstances described in Article 61(1) [Attachment Table 2] 2. A. B. (3) of the Enforcement Decree of the Fair Trade Act, it cannot be deemed that the amount of the government-funded materials is recognized as the "sales amount" of the Plaintiff joint supply and demand company for accounting purposes.

(4) Therefore, even if considering the unique nature of the bid documentation agreement, the amount of the government-funded materials cannot be deemed to have the nature of “a sales arising from an unfair collaborative act conducted in each of the instant construction works.” Thus, this part cannot be deemed to have been included in “a contract amount,” which is the basic basis for calculating the penalty surcharge under Article 9(1) of the Enforcement Decree of the Fair Trade Act. Therefore, in calculating the “contract amount,” the amount of the government-funded materials should be deducted.

D. Although the reasoning of the judgment below is inadequate, the court below's conclusion that the government-funded materials should be deducted from the calculation of "contract amount" is acceptable as it is based on the legal principles as seen earlier, and contrary to what is alleged in the grounds of appeal, there is no error of law by misapprehending the legal principles as to the basic standards for calculation of penalty surcharges in bidding

3. Conclusion

Therefore, all appeals are 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 Kim Jae-hyung (Presiding Justice)