[1] Method of determining whether a collaborative act constitutes a “competitive competition” under Article 19(1) of the Monopoly Regulation and Fair Trade Act, and method of determining whether a business entity, who participated in the agreement, would have been effectively able to compete without the agreement

[2] The purport of Article 19(1)8 of the Monopoly Regulation and Fair Trade Act regarding bid collusion, and whether the illegality is recognized in a case where a business entity, as a result of prior determination of a successful bidder by agreement, gives up participation in the bidding itself by a business entity who is not a successful bidder (affirmative in principle)

[1] Whether a collaborative act restricts competition should be determined by examining whether the collaborative act causes or threatens 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 such collaborative act, taking into account various circumstances such as characteristics of the pertinent goods or services, consumers’ standard for choosing products, impact on the market and enterprisers on competition. Determination of whether the participating enterprisers would be able to compete with each other without the agreement, focusing on the existence of their intent of competition among enterprisers, the existence of each enterpriser’s existence or their market performance, etc., and whether each enterpriser’s production capacity or technical ability, the substitutability of supply, the possibility of new entry into a market, and the specific situation of the market should be comprehensively taken into account.

[2] The purpose of Article 19(1)8 of the Monopoly Regulation and Fair Trade Act is to protect not only the competition itself but also the competition in the process of bidding up to the bidding. Therefore, if, as a result of a prior determination of a successful bidder by an agreement among the business operators, a business operator, who is not the successful bidder, voluntarily renounces the participation in the bidding itself, the possibility that the competition will function in advance is limited, and thus, the major part of the competition in the bidding process is limited, barring any special circumstances.

[1] Article 19(1) of the Monopoly Regulation and Fair Trade Act / [2] Article 19(1)8 of the Monopoly Regulation and Fair Trade Act

[1] Supreme Court Decision 2012Du19298 Decided November 14, 2013 (Gong2013Ha, 2256), Supreme Court Decision 2012Du27794 Decided February 27, 2014, Supreme Court Decision 2013Du1676 Decided June 11, 2015 (Gong2015Ha, 986)

EEE Engine Co., Ltd. (Law Firm LLC, Attorneys Kim Young-young et al., Counsel for the plaintiff-appellant)

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

Seoul High Court Decision 2012Nu14479 decided November 21, 2013

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

A. In the context of “agreement that unfairly limits competition” prohibited under Article 19(1) of the Monopoly Regulation and Fair Trade Act (hereinafter “Fair Trade Act”), the essence of “agreement” lies in the communication among two or more enterprisers. This includes not only explicit agreement but also implied agreement (see Supreme Court Decision 2012Du19298, Nov. 14, 2013, etc.).

(4) The lower court determined that the bid price of the Plaintiff was 20 years prior to the conclusion of the agreement between the Plaintiff and the 3-month tendering system (hereinafter referred to as the “instant bidding system”) and the 3-month tendering system (hereinafter referred to as the “2-month tendering system”), respectively, by dividing into the 3-month tendering system and the 3-month tendering system, the bid price of each of which was 20 years prior to the conclusion of the agreement between the Plaintiff and the 3-month tendering system (hereinafter referred to as the “2-month tendering system”) and the 3-month tendering system, each of which was 10 years prior to the conclusion of the agreement, and the 3-month tendering system and the 4-month tendering system, and the 2-month tendering system, each of which was 3-month tendering systems prior to the conclusion of the agreement.

C. Examining the reasoning of the judgment below in light of the aforementioned 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 the establishment of unfair collaborative acts, interpretation of defense acquisition programs statutes, or

2. As to the grounds of appeal Nos. 2 and 3

A. Whether a collaborative act restricts competition should be determined 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, taking into account the characteristics of the relevant goods or services, consumers’ standard for choosing products, and impact on the market and enterprisers on competition (see, e.g., Supreme Court Decision 2012Du19298, Nov. 14, 2013). Here, whether a participating enterpriser who participated in the collaborative act would have been able to compete with one another without the agreement, focusing on the existence of an intention of competition among the participating enterprisers, and whether each enterpriser’s existence or market performance would have a restriction on competition or competition among the respective enterprisers, and the following factors should be comprehensively considered. Meanwhile, Article 19(1)8 of the Monopoly Regulation and Fair Trade Act on the collusion has to be considered in advance, and thus, the part of the prospective bidder’s prior decision to participate in the tendering procedure is unreasonable.

B. The lower court determined that prior to the instant collaborative act, the Plaintiff and LIG would have prepared for their respective participation in tendering in all sectors of the instant lawsuit or system and would have prepared for their mutual competition with the third party, as well as that it is difficult to analyze the need to cooperate with the third party as much as possible due to the burden of price competition with the Plaintiff, on the grounds that (i) although there were superior technical skills in the field of the lawsuit or system, in some areas of the field of the lawsuit or system, the technical capacity overlap, (ii) the bidding or three companies seem to have been aware of each other as competitors; (iii) prior to the instant collaborative act, the Plaintiff and LIG would have prepared for their respective participation in tendering in all sectors of the instant lawsuit or system, (iv) on the premise of the competition relationship with the Plaintiff; (iv) on the basis of the premise of the competition relationship with the Plaintiff, it is difficult to analyze the necessity of the Plaintiff to cooperate with the Plaintiff as much as possible due to the increase in the tender price in the instant case, and (iii) on the other grounds that there was no possibility of the Plaintiff’s participation in bidding or proposal in the competition.

C. Examining the reasoning of the judgment below in light of the aforementioned 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 competition limitation or illegality or violation of the rules of evidence

3. As to the fourth ground for appeal

As seen earlier, we cannot accept the grounds of appeal asserting that the Defendant’s order to pay penalty surcharges against the Plaintiff was unlawful on the premise that the instant collaborative act was not constituted.

Furthermore, this case’s lawsuit or system bid is a project requiring high level of public regulation, and thus, it is not subject to penalty surcharges, and only the price actually received by the Plaintiff at the time of the order of payment of penalty surcharges in relation to bidding should be deemed as related sales. The argument in the grounds of appeal on the following grounds: (a) the collaborative act in this case is a violation of significant nature and thus, there is deviation or abuse of discretion in the process of calculating penalty surcharges; and (b) the collaborative act in this case’s deviation or abuse of discretion in the process of calculating penalty surcharges does not constitute a legitimate ground of appeal. Furthermore, it cannot be deemed that there was an error of law such as deviation

4. 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.

Justices Jo Hee-de (Presiding Justice)