2014Du6654 Corrective Order, etc.

KKBC Co., Ltd.

Fair Trade Commission

1. A;

2. B

3. C

4. D;

5. E.

Seoul High Court Decision 2012Nu15434 Decided March 26, 2014

November 27, 2014

The appeal is dismissed.

The costs of appeal are assessed against the Plaintiff, including the part arising from the supplementary participation.

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

1. As to the determination of the relevant commodity market

A. In order to determine whether a product constitutes an unfair collaborative act under each subparagraph of Article 19(1) of the Monopoly Regulation and Fair Trade Act (hereinafter “Fair Trade Act”), the scope of the relevant product market should first be determined in detail with respect to a certain business area in which competition relations may arise (hereinafter “related product market”). Here, the scope of the relevant product market refers to the scope of the products in competition. In determining the scope of the relevant product market, the price of the product related to the transaction, functions and utility similarity, purchaser’s awareness of substitutiveness, and related purchase behavior, as well as the supplier’s awareness of substitutiveness, form of management decision related thereto, homogeneity and similarity of business recognized socially and economically. In addition, the determination should also be made in full view of the situation of the other product necessary for the production of the product, and the market situation of the product manufactured based on the product, the easiness of substitution in terms of time, economic and legal aspects, etc. (see, e.g., Supreme Court en banc Decision 2002Du86219, Nov. 22, 2007).

On the other hand, considering the diversity of unfair collaborative acts and the efficiency and rationality of regulations, the defendant does not necessarily require empirical economic analysis in defining the relevant market for goods of one collaborative act. Even if the defendant did not undergo such analysis, the relevant goods market can be defined in light of the type and details of the collaborative act at issue, the economic effect which can be inferred from the contents itself, the general transaction reality of the goods or services subject to the collaborative act.

B. (1) The reasoning of the lower judgment and the evidence duly admitted reveal the following.

(A) General chemical fertilizers: (a) The Agricultural Cooperatives Federation shall compile the demand for chemical fertilizers from local agricultural cooperatives at the end of each year and conduct a competitive bidding to determine the quantity, unit price, etc. for each fertilizer supplier and each company; and (b) each unit cooperative shall purchase fertilizers from fertilizer suppliers to supply them to farmers according to its price and distribute them by the so-called "system purchase." The tobacco producer's Federation of Tobacco Producers (hereinafter referred to as the "YIF") play the role of the National Agricultural Cooperatives Federation and distribute them according to such system purchase.

(B) In order to reduce the financial burden of farmers from 1962, the government implemented the 'China Price System' which designates the NAF as an agency and purchases the entire quantity of the demand for farm fertilizers and sells them to farmers lower than the purchase price, and made it possible to compensate for the difference in the price. After closing the economic situation around June 2005, the government delegated the NAF to the NAF in 2008 and 2010. Accordingly, the price competitiveness of ordinary fertilizers without going through the NAF was weakened and the demand share reaches 9% in the case of ordinary chemical fertilizers.

(C) Meanwhile, the market share of manufacturers and sellers of 13 fertilizers including the Plaintiff (hereinafter referred to as “business operators including the Plaintiff”) in the chemical fertilizer bidding market ordered by the Agricultural Cooperatives Federation and the National Agricultural Cooperatives Federation (hereinafter referred to as “the Agricultural Cooperatives Federation”) has reached 100%.

(D) From November 1, 1994, the Plaintiff et al. agreed on the following bidding of various chemical fertilizers conducted by the NAC et al. as of June 14, 2010 each year by the Plaintiff et al. (hereinafter “instant collaborative act”).

① The National Agricultural Cooperatives Federation: (a) the 21-17-17 fertilizer group, component fertilizer group, NK fertilizer group, bean fertilizer group, bean fertilizer, salt calis, and customized fertilizer group; (b) the bidding process is that the bidding process is conducted in such a way as to determine the bidder as the successful bidder in the order of the bidders presenting the minimum unit price among the bidders of unit price not exceeding the estimated purchase price if the bidder participating in the bidding submitted together the quantity and unit price that he/she wishes to be awarded a successful bid; and (c) the Plaintiff et al. agreed on the bid price and quantity for each participant in the bidding.

② The Agricultural Cooperatives Federation: (a) did not specify the unit price bid for BB Fertilizer Group and NK Fertilizer Group in 2010; (b) determined only the unit price for the supply, namely, the quantity; (c) decided the unit price for the bidding; and (d) decided the bid price for the bidding by the business entity who participated in the bid at the lowest price among the bidding participants, and (e) agreed on the bid price for the bid by the business entity including the Plaintiff.

③ At the beginning of each year, a cooperative held a bid by a participant in the bidding in the form of a "minimum price bid", i.e., the total amount of expected volume of the fertilizer to be traded, from among participants, through a bid in the form of a successful bid. The Plaintiff et al. agreed that the participant, in advance, shall determine the bid price by bidding participants so that a specific project operator can be awarded a successful bid, and that part of the successful bid price by the project operator may be supplied to the project operator who excluded from the bidding, while the project operator who does not participate in the bidding can supply raw materials necessary for manufacturing the allocated volume.

(E) Each fertilizer subject to the instant collaborative act differs from the detailed usage, but, in principle, has complementary functions in light of its ingredients, utility, and usage as a chemical fertilizer for agricultural crops.

(바) 단일성분으로 제조된 단비(單肥)는 복합비료 제조의 원료가 되기도 하고, 21-17-17 복합비료 생산자는 그 생산 공정 및 생산 원료 등에 비추어 염화가리와 요소비료 생산자로 전환할 수 있다.

(G) In the bidding of some fertilizers such as dynasium, in the previous bidding of fertilizers, the enterprisers who did not participate in the bidding of the fertilizers were trying to participate in the new bidding, but the enterprisers, such as the Plaintiff, etc. who participated in the bidding of the said fertilizers were to have expressed their intent to participate in the bidding of the non-class category produced by the enterprisers who want to participate in the bidding of the fertilizers in response thereto.

(h) The South Sea Chemical, who is the participation of the instant collaborative act, demanded that 3% be additionally allocated in the tobacco first-aid fertilizer tender in 2010, taking into account the fact that it has promised to another enterpriser in the customized fertilizer tender.

(2) The facts and the following circumstances revealed from this fact, i.e., (i) the market for which the instant competitive bidding was conducted is a market which manufacturers and sellers of fertilizers, rather than the market for directly selling non-specific consumers to farmers who are end-consumers; and (ii) the instant collaborative act does not divide the Plaintiff et al. into non-type, but does not intend to maintain the previous market tools and prevent new competitors from entering into the market in order to maximize mutual interests by mutual interests; and (iii) in light of the legal principles as seen earlier, it cannot be deemed unreasonable to determine the entire market for the instant collaborative act into a bid-related general chemical fertilizer.

(3) To the same purport, the lower court determined that one collaborative act has been established as to the entire bidding of chemical fertilizers with respect to the entire bidding of the entire chemical fertilizers, with the agreement that the Defendant defined the market related to the collaborative act of this case as the bidding market of the entire chemical fertilizers, not the non-type bidding market, and that the Plaintiff’s assertion that part of the collaborative act of this case as to the tobacco tobacco bidding and salt calculty bidding had expired due to the interruption or termination of the collaborative act is justifiable, without any need to further examine. In so doing, the lower court did not err by misapprehending the legal doctrine on the definition of the relevant product market.

2. As to the interruption and termination of the collaborative act, and whether the period of prescription expires

The lower court acknowledged the Plaintiff’s assertion that the collaborative act, which existed until February 2007, was completed due to the completion of bidding of the supply chemical fertilizer in the year 2007, even if all kinds of non-identical collaborative acts were established, based on the adoption of evidence, and acknowledged facts as stated in its reasoning. ① Not only the Plaintiff participated in the collaborative act in December 1998, but also the items to which the Plaintiff directly participated in the eight non-identical collaborative acts, among the eight non-types of this case; ② the Plaintiff did not participate in the agreement on tobacco or chlodrye bidding; ② the Plaintiff participated in the agreement on tobacco supply in the 208, 209, as well as the 2007-year supply of tobacco, NK Fertilizer, and Mean; ③ the Plaintiff did not appear to have participated in the agreement on the 19-year supply of tobacco in the 209-year supply of tobacco, and ④ the Plaintiff did not appear to have agreed on the 19-year treatment of the 19-year supply of tobacco.

In light of the relevant legal principles and records, such determination by the court below is just, and there is no error by misapprehending the legal principles on the interruption and termination of collaborative acts, and the period of extinctive prescription.

3. As to whether competition restriction exists

A. Whether a collaborative act restricts competition as provided by Article 19(1) of the Fair Trade Act should be determined individually by examining whether the 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 due to the collaborative act in question, in light of the characteristics of the relevant product, consumers’ standard for choosing products, and the impact of the relevant act on the market and enterprisers on the competition. Furthermore, the act of jointly determining or changing price by enterprisers causes or is likely to cause impacts on the free determination of price according to their intent by reducing the price competition within the scope thereof, and such collaborative act by enterprisers is deemed unfair, barring any special circumstance (see, e.g., Supreme Court Decision 2008Du20376, May 26, 2011).

B. The lower court determined that: ① the maximum price for the purchase of agricultural cooperatives, etc. is the upper limit for the system purchase that is not disclosed to the public; ② the business entities, including the Plaintiff, etc., were meaningful to set a reasonable price and quantity through free competition among the business entities, including the Plaintiff, etc.; ② the Plaintiff, etc., would be prevented from bidding at a price considerably lower than the purchase price if they freely compete with each other; ③ would have engaged in the instant collaborative act in advance to supply the quantity they wished to do; ③ the supply quantity is not guaranteed even if it is awarded a successful bid due to the characteristics of the purchase without the order; ③ even if the supply quantity is determined by bidding, it is not possible to set the cooperative price and determine the quantity of the goods to be supplied to the local agricultural cooperatives or farmers at a price lower than the cooperative price; ② the Plaintiff et al., was prohibited from supplying the goods to be supplied to the Plaintiff, etc. at a price lower than the market price for the instant chemical transaction in which the Plaintiff et al., the Plaintiff et al. would be justified in the instant collaborative act.

C. Such determination by the court below is just in accordance with the legal principles as seen earlier, and it did not err by misapprehending the legal principles as to restrictions on competition of unfair collaborative acts.

4. As to the infringement of procedural right of defense

The lower court determined that the Plaintiff’s assertion to the effect that, unlike the review report, the Defendant’s collaborative act was constituted as to the entire non-party type, unlike the instant disposition, on the following grounds: (i) whether the instant collaborative act constitutes a single collaborative act by non-party type or all non-party type; (ii) whether the collaborative act constitutes a single collaborative act by including the whole non-party type, is merely different from the legal judgment on the same basic facts; and (iii) it cannot be deemed that the Defendant changed basic facts constituting the instant collaborative act in a series of procedures up to the disposition of the instant case or added new facts; and (iii) on January 11, 2012 prior to the instant disposition, certain enterprisers in the Defendant’s plenary session were constituted a separate collaborative act by non-party type, and thus, it cannot be deemed that there was a procedural error of infringement on the Plaintiff’s right to defense; and thus, (iv) it did not accept the allegation.

In light of relevant statutes, legal principles, and records, such determination by the court below is just, and there is no error of misapprehending the legal principles on granting of opportunity to state opinions and infringement of procedural right of defense under the Fair Trade Practices Act.

5. As to whether or not the discretion in the calculation of a penalty surcharge is deviates or abused

The lower court determined that (1) the Plaintiff’s assertion that part of the instant collaborative act could not be deemed to have been subject to the statute of limitations for disposal, and that the Defendant did not accept the Plaintiff’s assertion that the period of prescription for disposal was included in the relevant sales computed by the Defendant, and (2) the Defendant’s first on-site investigation was conducted on June 8, 2010 by June 11, 2010, solely on the ground that the Plaintiff notified other fertilizer enterprisers of the intent that “the Plaintiff would set the bid price and bid volume independently without performing the same collaborative act as the instant collaborative act on June 16, 2010.” (3) The Plaintiff cannot be deemed to have been unilaterally recommended or forced to participate in the instant collaborative act from large fertilizer enterprisers for a long time, and rather, the Plaintiff could not be deemed to have voluntarily participated in the instant collaborative act for a long time, and thus, it is difficult to deem that only the Plaintiff participated in the instant collaborative act or had been forced to participate in the instant simple act.”

In light of the relevant legal principles and records, the lower court did not err by misapprehending the legal doctrine on deviation and abuse of discretion in the calculation of penalty surcharges.

6. Conclusion

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

Justices Kim Shin

Justices Min Il-young

Justices Park Poe-young

Justices Kwon Soon-il