Lot shopping Co., Ltd. (Law Firm LLC, Attorneys Jeong Sung-hoon et al., Counsel for the plaintiff-appellant)

Fair Trade Commission (Law Firm Kang, Attorneys Adjust-chul et al., Counsel for defendant)

May 23, 2018

1. The Defendant’s corrective order and penalty surcharge payment order in attached Form 1, which was issued against the Plaintiff by Decision No. 2017-198, June 19, 2017, shall be revoked in entirety.

2. The costs of the lawsuit are assessed against the defendant.

The same shall apply to the order.

1. Basic facts

A. The plaintiff's status, etc.

The Plaintiff is a business entity whose retail sales in the immediately preceding business year are at least 100 billion won, that sells goods supplied by consumers by multiple business entities. The Plaintiff is a large franchise and retail business entity under Article 2 subparag. 1 of the Fair Trade Act (hereinafter “Large-Scale Distribution Business Act”) and is a business entity under Article 2 subparag. 1 of the Monopoly Regulation and Fair Trade Act (hereinafter “Fair Trade Act”). The Plaintiff’s general status is as follows.

Table (units: 25,982, 810, 10, 477, 055, 15, 505, 754 16,042, 364, 51, 783, 2020, 706 10,488, 999 15,531, 707, 16, 177, 304, 304, 304, 26,817, 978, 853, 215, 964, 76316, 116, 54317, 2014, 26, 817, 978, 853, 215, 964, 76316, 115, 54317

(b) Market structure and actual conditions;

1) Current status of domestic department stores markets

As of the end of May 2015, 14 department stores are all branded, and the number of stores is 105 in total. Among 14 brands, the number of stores in the modern department stores, and the number of stores in the new world department stores is reached 63, and 24 department stores in Ireland, 5 department stores in gallonian department stores, and 1 through 2 stores in local department stores, etc.

2) Major forms of transaction of department stores

The forms of transactions with suppliers, etc. are largely classified into special contract purchase transactions, direct purchase transactions, and store lease transactions.

A) A special contract purchase transaction is a method in which the department store purchases goods on credit on the condition that it is possible for the supplier to return unsold goods among the goods purchased from the supplier, and pays the sales proceeds of the goods after deducting sales proceeds (sales commission) of a certain percentage or of a certain amount after selling the goods. This is an intermediate nature of a lease transaction and a direct purchase transaction and mainly takes place in the clothing sector, etc.

B) Direct purchase transactions are the purchase method in which the department store completely purchases goods from the supplier and pays the price of goods. This is at the same time the department store transfers ownership to the department store and at the same time the costs and responsibilities for the sale are borne by the department store and mainly conducted in the food sector, etc.

C) Lease transactions are divided into leased locks and leased money in accordance with the method of paying rents, by which store tenants rent and use part of store stores for the sale of goods, etc. and pay part of the sales amount as rents, including sales discount, inventory management, etc. from the issuance of the tax invoice to the lessee’s name and account.

Rent is a method that the store lessee deposits the lease deposit in the department store and the rent is paid in a fixed amount each month, and the lease transaction is made in the way that the store lessee pays the lease deposit at a certain ratio of the sales amount of the goods.

D) The proportion of the Plaintiff’s sales to each type of major transactions is as follows.

Table (units: KRW 7,064, 595 87.16, 789, 1185 806,8273.82,82,8203.4 Lease 692,588.5 828,684, Oct. 4, 684 and other 50,60,6010.654, 7070.70.7 8,114, 5810.07, 00.07, 10.07, 2010, 329, 329, 10.4

C. The defendant's corrective order and penalty surcharge payment order

1) On April 21, 2017, the Defendant issued a 2017-198 resolution at the Defendant’s plenary session, and, for a period from March 15, 2014 to March 14, 2015, issued the Plaintiff’s 3 stores (hereinafter “each store of this case”) with a total of 4 occasions as follows ( regardless of purchase at the stores participating in the events, the Defendant paid free of charge to the customers visiting the stores on a first-come-come-served basis, and divided the number tickets in order from the entrance of the department store before the commencement of the business to the customers who received the number tickets to visit the stores and to whom the free company supplies at the stores in question had them receive the sales number tickets in the form of “sale promotion events” to ensure that such free sale of the stores was carried out by the supplier without charge, and that free sale order should be carried out by the supplier’s entrance of each of the instant case including the instant sales promotion order to the extent of free sale promotion of the stores.

본문내 포함된 표 (단위: 원) 전체 판매촉진행사 내용 이 사건 무료사은품행사 행사명(행사기간) 점포명 날짜 이 사건 각 납품업체의 참여 브랜드 이 사건 각 납품업자 부담액 합계 ○○ 5F 리뉴얼 오픈 프로모션(2014.3.15.∼3.16.) ○○점 2014.3.15. ‘츄’ 등 16개 4,081,600 ☆ ☆☆☆☆ 릴레이페어1차(2015.3.6.∼3.8.) △△점 2015.3.6. ‘반에이크’ 등 15개 1,870,000 ☆ ☆☆☆☆ 릴레이페어2차(2015.3.13.∼3.15.) □□□□점 2015.3.13. ‘임블리’ 등 20개 4,057,500 ○○점 2015.3.14. ‘츄’ 등 8개 1,616,500 합 계 11,625,600

2) The Defendant imposed a penalty surcharge on the Plaintiff pursuant to Article 35 of the Large Franchise and Retail Business Act, Article 28 of the Enforcement Decree of the Large Franchise and Retail Business Act (amended by Presidential Decree No. 28580, Jan. 9, 2018; hereinafter “Enforcement Decree of the Large Franchise and Retail Business Act”), and the provision of the public notice on imposition standards for penalty surcharges on a person violating the Large Franchise and Retail Business Act (amended by Defendant Notice No. 2014-17, Dec. 17, 2014; hereinafter “public notice on penalty surcharges under the Large Franchise and Retail Business Act”), and the details of calculation of the penalty surcharge are as follows.

A) Criteria for calculation

(1) Relevant sales

The instant free sale event aims at promoting the overall increase in sales during the period of exercise for the purpose of gathering. Since it is difficult to calculate the price of supply directly or indirectly affected by the Plaintiff’s violation during the period of the Plaintiff’s violation, a fixed amount penalty is imposed pursuant to the proviso to Article 35(1) of the Large-Scale Distribution Business Act.

(2) Criteria for calculation

In light of the content and degree of the relevant violation, it is difficult to deem that most of the costs of the instant free shop goods are borne by the Plaintiff to have caused serious damage to the supplier. It is reasonable to view that the supplier also obtained benefits such as promotion of brand and increase in sales, etc. as a result of the implementation of the instant free shop goods event to a certain extent, and in light of the content and degree of the relevant violation, it shall be deemed that the supplier was “an act of gross violation,” and the amount of the relevant imposition standard amount (at least KRW 10 million but less than KRW 10 million) shall be determined based on the calculation standard amount.

(3) Coordinations by action or by an element of the person;

The amount of 76,50,000 won that reduces 15% from the calculation standard amount shall be calculated as the adjustment amount, taking into account the fact that the Plaintiff is dissatisfied with illegality, but the non-delivery of the written contract for promotional events itself was partially cooperative in the investigation, such as recognition.

(4) Determination of penalty surcharges

Considering the real ability of the plaintiff, the effect of the violation on the market, etc., it is difficult to see that the adjusted amount is excessive, and the amount of less than 76,00,000 won is reduced as a penalty surcharge.

[Reasons for Recognition] Facts without dispute, entry of Gap evidence No. 1 (including branch numbers; hereinafter the same shall apply) and purport of whole pleadings

2. Relevant statutes;

Attached Table 3 is as shown in the "relevant Acts and subordinate statutes".

3. Whether the instant disposition is lawful

A. Summary of the plaintiff's assertion

1) Discretionary defects in the application of Article 11(5) of the Large-Scale Distribution Business Act

A) The Plaintiff recognizes the fact that the exercise of the instant free goods requires the supplier to bear the cost of the free goods. However, since the exercise of the instant free goods was conducted by the supplier’s voluntary request, it is recognized that the instant free goods were self-explosive and differentiated by exercising differentiatedly with other suppliers that do not participate in the exercise of the goods. Thus, this constitutes an exception to Article 11(5) of the Large-Scale Distribution Business Act.

B) Therefore, the Plaintiff does not bear the duty of delivery of prior written agreements and contracts under Article 11(1) and (2) of the Large-Scale Distribution Business Act.

2) Violation of the principle of proportionality

A) In the event that the Defendant imposes a sanction on the same type of act as the exercise of the instant free product, the effect of significantly narrow the scope of application under Article 11(5) of the Act on Large Franchise and Retail Business is generated. Large franchise and retail business operators, such as the Plaintiff, are bound to reduce the event of sales promotion by threatening risks of future sanctions. As can be seen, where sales promotion events are reduced, damage therefrom leads to the Plaintiff or suppliers and the consumers who do not enjoy benefits. As can be seen, taking into account the effects of the instant disposition, the imbalance between the effects of the disposition and the disadvantage that would result in sales reduction, and the cost of sales promotion borne by the supplier by bearing 86% of the cost incurred in the exercise of the instant free product, and the cost of sales promotion borne by the supplier was minor compared to the sales achieved by the supplier during the exercise period, not the corrective order and penalty surcharge payment order, and even if the need for corrective order is recognized, the instant disposition violates the principle of proportionality, and thus, is unlawful.

(iii) the inherent illegality of the penalty surcharge payment order

Even if the illegality of the exercise of free gift of this case is acknowledged, ① the free gift of this case did not suffer any disadvantage from suppliers due to the exercise of goods, and ② the exercise of free gift of this case took place only 3 stores, 4 events, and 42 suppliers participating in the exercise of goods, and its weight and frequency are insignificant. ③ As alleged by the Defendant, the Plaintiff could have more charge the supplier with the amount of free gift of this case, and thus, the Plaintiff could not be deemed to have obtained unjust enrichment through the exercise of goods, ④ the exercise of free gift of this case was commenced at the supplier’s request and there is little possibility that the exercise of goods of this case would lead to unfair advance of expenses or abuse of the Plaintiff’s trade position in light of the progress of the exercise of goods. In addition, the penalty surcharge order of this case was imposed even if the issue of imposing the penalty surcharge of this case is not a matter subject to the imposition of the penalty surcharge of this case.

(b) Fact of recognition;

1) In relation to the exercise of the instant free gift, the Plaintiff: (a) on February 25, 2014, the ○○○○○ (hereinafter “2014 event”; and (b) in the same manner, the instant free gift events specified the events of the relevant branch among the events); (c) February 25, 2015 (hereinafter “2015 △△ event”); (d) March 11, 2015 (hereinafter “2015 △ event”); (c) on March 11, 2015, the ○○ event on March 5, 2015 (hereinafter “2015 ○ event”); and (d) the ○○ event on March 5, 2015 (hereinafter “2015 ○○ event”). In the case of the ○○○ branch, the proposal was formulated at the head office on March 11, 2015, and was drafted again on March 11, 2015).

2) At the instant free shop events, suppliers participated in a total of 16 brands, 15 main brands, 15 main brands, 14 main brands, 14 main supplier, 2015 △△△ event, 2015, 20 brands, 19 main supplier, 3 main brands, 2015 ○○○○○ event, 8 main brands, 8 main brands, and 8 main suppliers 4).

3) In the event of the 2015 △△△ event, 14 companies among the 19 suppliers, and 2015 ○○○ event were sent by three companies among the 8 suppliers, prior to each Plaintiff’s proposal concerning the event of the instant free gift items, the instant free gift items were sent to 5 companies.

4) The instant free private events were proposed to be held on March 15, 2014 in the event of 2014 ○○○○○○○○○○○○, and the event of 2015 △△△△△△○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○.

5) The contents of the instant free sale are different from those of the events proposed by suppliers (subject to increase, duration of exercise, etc.) among the instant free sale events (subject to increase, duration of exercise, etc.) in the following table:

본문내 포함된 표 행사별 브랜드명 납품업자명 행사내용 변경내용 납품업자공문 실제 행사 2014 ○○점 팬콧 브랜드 구매고객 대상 선착순 방문고객 대상 플랙진 를래시드웨이브코리아 구매고객 대상 선착순 방문고객 대상 2015 △△점 반에이크 미도컴패니 3. 6.~3. 8.(3일) 3. 6.(1일) 기간 라인 라인바이린 고정고객 선착순 방문고객 대상 카이아크만 아비스타 구매고객 선착순 방문고객 대상 MLB F＆F 구매고객 선착순 방문고객 대상 CK ACC 와나코코코리아 구매고객 선착순 방문고객 대상 2015 □□□□점 임블리 부건에프엔씨 3. 14. 15~16시 3. 13. 오픈시 기간 체리코코 체리코코 구매고객 선착순 방문고객 대상 피그먼트 케이컴퍼니 구매고객 선착순 방문고객 대상 2015 ○○점 플마제 플러스마이너스제로 3. 13.~3. 15.(3일) 3. 14.(1일) 기간 톰앤래빗 톰앤래빗 3. 13.~3. 15.(3일) 3. 14.(1일) 기간 조군샵 조군 3. 13. 3. 14. 기간 토모톰스 티앤티트레이딩 3. 13.~3. 15.(3일) 방문, 구매고객 3. 14.(1일) 선착순 방문고객 기간, 대상 밀스튜디오 헴펠 3. 13.~3. 15.(3일) 3. 14.(1일) 기간 위드이픈 위앤아이커머스 구매고객 선착순 방문고객 대상

6) The sum of the costs borne by the Plaintiff in connection with the exercise of the instant free product is approximately KRW 77,168,00, and the sum of the costs borne by the supplier is KRW 11,625,600.

[Reasons for Recognition] Facts without dispute, entry of Eul Nos. 1, 4 through 15, and the purport of the whole pleadings

C. Determination

1) Whether the instant free sale constitutes an exception under Article 11(5) of the Act on Large-Scale Distribution Business

A) Relevant legal principles

According to Article 2 subparag. 8 of the Large Franchise and Retail Business Act, a sales promotion event refers to any event or activity conducted to increase demand for goods, irrespective of its name or form. Article 11(1) and (2) of the Large Franchise and Retail Business Act does not impose a large franchise and retail business operator on a supplier, etc. unless a supplier, etc. enters into an agreement with a supplier, etc. on the burden of expenses incurred in a sales promotion event as prescribed by Presidential Decree before conducting such sales promotion event as prescribed by Presidential Decree. The aforementioned prior agreement must be made in writing signed or sealed by a large franchise and retail business operator and a supplier, etc., and a large franchise and retail business operator shall provide this document with a supplier, etc. at the same time as the agreement. In addition, Article 11(4) of the Large Franchise and Retail Business Act provides that even in cases where a supplier, etc. voluntarily requests a large franchise and retail business operator to pay a sales promotion cost by prior agreement, the share ratio of expenses incurred in the sales promotion of a large franchise and retail business operator shall not exceed 50/100.

The purpose of limiting the burden of sales promotion cost in the Large Franchise and Retail Business Act is to prevent the supplier from being forced to bear unfair sales promotion cost, in that large franchise and retail business operators voluntarily plan sales promotional events and bear the costs to the supplier, even if the supplier is difficult to refuse it.

B) Determination

The instant free sale of goods constitutes a sales promotion event under Article 2 subparag. 8 of the Large-Scale Distribution Business Act, which constitutes a sales promotion event under Article 11 of the Large-Scale Distribution Business Act. It is reasonable to deem that the instant free sale of goods constitutes a sales promotion event under Article 11 of the Act.

However, considering the facts acknowledged earlier and the following circumstances recognized by the overall purport of the statements and arguments stated in Gap evidence Nos. 4, 5, and Eul evidence Nos. 1 through 15, the instant free gift event constitutes a case where "a supplier, etc. intends to conduct a sales promotion event differentiated from other suppliers, etc. by voluntarily requesting a large franchise and retail business operator to make a request," i.e., a case where self-e., a sales promotional event differentiated from other suppliers, etc., and it is difficult to view that the instant disposition by the Defendant was unlawful on a different premise.

(1) According to the proposal of each supplier of this case, the Plaintiff appears to have proposed various sales promotion events regarding the entire store including the exercise of free goods. Among the suppliers of this case, a considerable number of free goods of this case was sent to each of the suppliers of this case prior to the date of each Plaintiff’s proposal concerning the exercise of goods. The free goods of this case was part of the entire suppliers of this case, and the Non-Party, who is an employee of this case, can not be deemed to have been aware of credibility of each of the supply of goods of this case by taking into account the following facts: (a) prior to the 2014 ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ 2.

(2) As seen earlier, in light of the supplier’s official document sent by the supplier and the actual event period, the supplier’s official document and the Plaintiff’s draft statement are different. According to the Plaintiff’s written testimony and the supplier’s written testimony, it appears that the change in the above contents of the event can be deemed that there is no prior agreement between the Plaintiff and the supplier. However, given the characteristics of the department store where multiple suppliers are located, it is difficult for the supplier to have a certain degree of unity for the efficient progress of the event and advertisement. However, it is difficult to view that the supplier’s initial event plan was entirely carried out or all changes in the event were approved, and that the supplier’s 6 brand product’s 200 out of the modified brand product’s 2015 free brand product were not included in the revised brand product’s 2015 free brand product.

(3) In the event of the instant free shop is an event that provides free shop goods on a first-come-served basis at each supplier’s stores participating in the instant event. As such, customers are allowed to visit each supplier’s stores on a first-come-served basis only, and free shop goods can be received. As such, where free shop visits stores in order to receive a commodity, the sales of the relevant store increase by naturally making the store be purchased, and if there is any good for mind, the store’s sales increase. The Defendant’s cost of free shop goods is a cost of free shop goods prepared in each store. The cost of free shop goods offered only to customers visiting the relevant store is a cost of free shop goods prepared in each shop. The “free shop goods” is strong in the nature of maintaining order in preparation for many gathers prior to the commencement of the business, and it is reasonable to view that free shop goods are sold in the supplier’s core to encourage free shop goods to be sold, and thus, it is reasonable to deem that free shop goods are sold in order to encourage other free shop goods to be sold.

(4) In interpreting the differential nature of Article 11(5) of the Large-Scale Distribution Business Act, given the characteristics of sales promotional events that can be selected by suppliers due to the characteristics of sales stores that sell the same and similar products in the same space. As alleged by the Defendant, there is no discrimination between the supplier that participated in the sales promotional events and the supplier that did not participate in the sales promotional event and the supplier that did not have any economic effect different from the economic effect of the sales promotional events. The discrimination under Article 11(5) of the Large-Scale Distribution Business Act is not related to the contents of the sales promotional event, and the same sales promotional effect as claimed by the Defendant is nothing more than the subsequent outcome of the sales promotional event, and even if it is a differentiated sales promotional event with suppliers that did not participate in the event, it cannot be viewed that there was a significant discrimination in the sales promotional result due to different factors irrelevant to the contents of the event, but this part of the Defendant’s assertion is without merit.

(5) A total of 42 suppliers participating in the instant free sale is 1,625,600 won in total for the costs incurred for the instant 4 events. However, the sales that these suppliers achieved during the instant free sale period are 83% in total when compared to the sales of the preceding events, 242% in total when compared to the sales of the event, and 17% in the event of the event of 2015 ○○○○○, 2015, 30% in total, and 67% in the event of the event of ○○○○○○○○○○, 2015, and 2015 ○○○○○○○○○, 2015. Comparing the sales promotion cost borne by each of the instant suppliers, the degree of such burden is very minor.

C) Sub-decision

Inasmuch as the instant free sale of goods constitutes a case where each supplier voluntarily requested the Plaintiff and conducted a sales promotion event differentiated from other suppliers, it constitutes an exception to Article 11(5) of the Large-Scale Distribution Business Act. Therefore, the instant disposition based on the premise that “the Plaintiff, while exercising the instant free sale of goods, was in violation of Article 11(1) and (2) of the Large-Scale Distribution Business Act by bearing some of the costs to the instant supplier without a written agreement, while exercising the said free sale of goods, is unlawful without any further determination as to the remainder of the Plaintiff’s assertion. Therefore, the instant disposition should be revoked.

4. Conclusion

Therefore, the plaintiff's claim seeking the cancellation of the disposition of this case is reasonable, and it is so decided as per Disposition.

[Attachment]

Judges Park Jong-nam (Presiding Judge)

1) Brurdy Lone Star Co., Ltd. (the stock company is omitted from the name of the supplier; hereinafter the same shall apply), YK038, Dried Liber, Vietnames, drhos, rostostostostosia, Ethrweb Korea, brand, brand, Ethrheat Korea, Mtrend, Mtrend, lustostostosia, e.g., C&S, T&T trading, skins tosteis

Note2) Bodocom, Bospathatha, Espathatha, Espathathab, Moco Korea, F&F, Linabinn, Venebin Korea, Seneastastatha, Linastatha, Linathatha, fashion, Mtren, Mtren, Mtrenno, Thomatha, Columinasta

주3) 미도컴패니, 부건에프앤씨, 에보니아이즈, 더베이직하우스, 동광인터내셔날, 립합, 보끄레머천다이징, 빌리지유통, 선도, 조군, 체리코코, 케이컴퍼니, 톰앤래빗, 티앤티트레이딩, 티엔제이, 플러스마이너스제로, 피피비스튜디오스, 핑크에이지, 햄펠

주4) 위앤아이커머스, 더베이직하우스, 조군, 톰앤래빗, 티앤티트레이딩, 플러스마이너스제로, 피피비스튜디오스, 햄펠

5) In the event of an event of △△△△ 2015, two companies and one company’s official dispatch date in the event of an event of △△ ○○ ○○○○.