[1] The meaning of the market according to the related goods as the premise for determining an unfair collaborative act under Article 19(1)1 of the Monopoly Regulation and Fair Trade Act and the method of defining the market

[2] In a case where Gap corporation, etc., who manufactured and sold beverages, agreed to jointly raise the price of the beverage products constitutes "an act of determining, maintaining, or changing the price" under Article 19 (1) 1 of the Monopoly Regulation and Fair Trade Act, and the Fair Trade Commission ordered corrective measures and payment of penalty surcharges, the case holding that the court below erred by misapprehending the legal principles as to the determination of the relevant beverage market as a whole, where the relevant product market was the entire beverage market

[1] Article 2 subparag. 8, Article 19(1)1, and Article 22 of the Monopoly Regulation and Fair Trade Act; Article 9(1) of the former Enforcement Decree of the Monopoly Regulation and Fair Trade Act (Amended by Presidential Decree No. 23864, Jun. 19, 2012) / [2] Articles 2 subparag. 8, 19(1)1, and 22 of the Monopoly Regulation and Fair Trade Act; Article 9(1) of the former Enforcement Decree of the Monopoly Regulation and Fair Trade Act (Amended by Presidential Decree No. 23864, Jun. 19, 2012)

[1] Supreme Court Decision 2010Du18703 Decided April 26, 2012 (Gong2012Sang, 873)

Daro Food Co., Ltd. (Attorneys Lee Im-soo et al., Counsel for the defendant-appellant)

Fair Trade Commission (Attorney Hwang Young-hoon, Counsel for defendant-appellant)

Seoul High Court Decision 2009Nu38406 decided November 25, 2010

The part of the lower judgment against the Plaintiff is reversed, and that part of the case is remanded to the Seoul High Court. The Defendant’s appeal is dismissed.

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

1. The plaintiff's ground of appeal No. 1

A. 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 any of the following acts that unfairly restrict competition (hereinafter “unfair collaborative act”) or allow another business entity to engage in such act.” The main text of Article 22 of the Fair Trade Act provides that “The Fair Trade Commission may impose a penalty surcharge on the business entity within the scope not exceeding the amount calculated by multiplying the sales amount determined by the Presidential Decree by 10/100,” and the main text of Article 9(1) of the former Enforcement Decree of the Monopoly Regulation and Fair Trade Act (amended by Presidential Decree No. 23864, Jun. 19, 2012) provides that “any person who violates the provisions of Article 19(1) of the Monopoly Regulation and Fair Trade Act (hereinafter “Fair Trade Act”) shall not be permitted to engage in an act that falls under any of the following subparagraphs, by contract, agreement, resolution, or any other means.” The main sentence of Article 9(2) of the former Enforcement Decree of the Monopoly Regulation and Fair Trade Act (hereinafter “Fair Trade Act”).

In light of the content, form, structure, legislative intent, etc. of the relevant laws and regulations, first of all, to determine whether a product constitutes an unfair collaborative act under Article 19(1)1 of the Fair Trade Act, a market for the related product (hereinafter “related product market”) should be specifically determined with respect to a certain business area in which competition relations may arise. Here, the relevant product market refers to the scope of a product under competition, and specifically, where the price of the product traded is increased or decreased to a certain level for a considerable period of time, representative buyers or sellers of the product may purchase or convert the product in response thereto if the price of the product traded has increased or decreased to a certain extent. In defining the relevant product market, the similarity of function and utility of the product subject to trade, purchaser’s awareness of substitution possibility, and the relevant business decision-making form related thereto should be comprehensively considered (see Supreme Court Decision 2010Du18703, Apr. 26, 2012, etc.).

B. The lower court, on the premise that the relevant market should be changed depending on whether the act requires the definition of the relevant product market is a business combination subject to regulation under the Fair Trade Act or an unfair collaborative act, based on whether the relevant product market is a business combination subject to regulation under the said Fair Trade Act, determined that the entire beverage market, including the following: (a) the negligence beverage that processes negligence or hydrogen as its main ingredient, and the negligence beverage that is the drinking beverage that processes the relevant product market, and the effect of restricting competition was generated in the entire beverage market, on the ground that the manufacturing business entities, including the Plaintiff, engaged in restricting price competition in the entire beverage market; and (b) the negligence beverage that processes the relevant product market as the main ingredient of the whole beverage market.

C. However, in full view of Article 2 subparag. 8 of the Fair Trade Act, as well as Article 2 subparag. 8 of the Fair Trade Act, and various examination standards prepared by the Defendant himself as to the standard for determining the relevant product market, the standard for determining the relevant product market is essentially different depending on whether the act requires the definition of the relevant product market like the lower court.

In addition, the subject, purpose, effect, etc. of the agreement that the court below considers as the basis for the determination of the pertinent collaborative act falls under the elements of assessing competition restriction of unfair collaborative acts premised on the determination of the relevant product market rather than the factors of consideration for the determination of the relevant product market. If the relevant product market is demarcated in the same manner as the court below, the determination of the relevant product market and the evaluation of competition restriction is not conducted, but the scope of the effect of competition restriction is deemed as the relevant product market (see Supreme Court Decision 2010Du18703, Apr. 26, 2012).

In particular, the lower court’s examination of the drinking water belonging to the same relevant goods market, among them, includes shot water, functional beverage, sports beverage, tea, etc., but it is difficult to readily recognize that these beverages are included in the same relevant goods market in terms of functions and utility of the drinking water, awareness of substitutability of buyers, etc. However, if the price of each drinking water increases or decreases to a certain extent for a considerable period of time, it can easily be easily known that there are various drinking water products, the representative buyer or seller of the drinking water, or seller of which can purchase or convert into sales. Accordingly, the lower court should first consider the similarity of functions and utility of the drinking water subject to the instant collaborative act in accordance with the foregoing legal doctrine, recognition of substitutability of substitution of buyers, and management decision-making form related thereto, etc., and first consider whether the relevant goods market, which is the premise of the instant collaborative act, has been established.

Nevertheless, the lower court determined otherwise solely on the grounds stated in its reasoning. In so determining, the lower court erred by misapprehending the legal doctrine on the determination of the relevant product market, which is a premise for determining whether it constitutes an unfair collaborative act, and by failing to exhaust all necessary deliberations, thereby adversely affecting

2. As to the Defendant’s ground of appeal

The Defendant: (a) premised on the premise that the entire beverage market is a single related product market; and (b) deemed that the Plaintiff participated in all three collaborative acts, the Defendant ordered the payment of penalty surcharges; (c) however, the lower court accepted the Defendant’s judgment on the determination of the relevant product market, but revoked the Defendant’s order to pay penalty surcharges on the ground that the Plaintiff did not participate in the collaborative

Since the Plaintiff participated in the collaborative act around February 2008, the Defendant’s revocation part of the Defendant’s penalty surcharge order among the judgment below should be reversed. However, whether a collaborative act is involved can be determined after the relevant goods market was properly demarcated. As to the Plaintiff’s ground of appeal No. 1, as seen earlier, the court below erred by misapprehending the legal principles on the determination of the relevant goods market and failing to exhaust all necessary deliberations, and thus, the Defendant’s order to pay penalty surcharge should be revoked without any need to determine whether the Plaintiff participated in the collaborative act. Therefore, the judgment of the court below is just in its conclusion, and contrary to the allegations in the grounds

3. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal by the Plaintiff, the part against the Plaintiff is reversed, and that part of the case is remanded to the lower court for further proceedings consistent with this Opinion, and the Defendant’s appeal is dismissed. It is so decided as per Disposition by the assent of all participating Justices

Justices Ko Young-han (Presiding Justice)