[edit] Supreme Court Decision 2000Du1386 delivered on May 28, 2002 [Revocation of a Corrective Order, etc.]
【Main Issues】
[1] Facts to be proved for the presumption that the enterprisers have agreed to engage in unfair collaborative acts under Article 19 Paragraph 5 of the former Monopoly Regulation and Fair Trade Act
[2] A case where it was presumed that oligopolistic toilet paper manufacturers were engaged in unfair collaborative acts under Article 19 Paragraph (5) of the former Monopoly Regulation and Fair Trade Act, where for a certain period of time factory price of toilet paper was maintained at the same level
[3] Standards to determine whether the presumption of collaborative acts under Article 19 Paragraph (5) of the former Monopoly Regulation and Fair Trade Act may be rebutted (affirmative with qualification) and whether the following businesses have established a mutual collaboration among themselves, where the factory price of toilet paper was set at the same level as the result of the following businesses unilaterally copying the price independently set by the advance business whose market share is high in an oligopolistic market structure
[4] A case where not only the presumption of collaborative acts under Article 19 Paragraph (5) of the former Monopoly Regulation and Fair Trade Act may be rebutted, but also it cannot be presumed that the following businesses agreed to engage in unfair collaborative acts, in a situation where the factory price of toilet paper is at the same level as the result of the following businesses' unilaterally copying the price independently set by the advance business whose market share is high in an oligopolistic market structure
[5] A case where the presumption of unfair collaborative acts may not be rebutted on the ground that it is unlikely that the price setting activity of the following businesses unilaterally copied that of the advance business, where the date of the internal decision to raise prices as well as the date when price increase term has been the same as a result of the phenomenon of price alignment of the following businesses to the advance businesses in an oligopolistic market structure
【Summary of Decision】
[1] If the Fair Trade Commission proves that under Article 19 Paragraph (5) of the former Monopoly Regulation and Fair Trade Act (which was amended by Law No. 5813 of February 5, 1999) 'more than two enterprisers have engaged in an activity within the purview of each Subparagraph of Paragraph 1 of Article 19' and 'actions that, in substance, limit competition within a certain field of transaction,' it is presumed that the enterprises engaged in such collaborative acts without the additional circumstantial facts which prove an express or implied agreement or consent on the part of the enterprises.
[2] A case where additional proof as to factors and circumstances is not required to presume that unfair collusion under Article 19 Paragraph (5) of the former Monopoly Regulation and Fair Trade Act (which was amended by Law No. 5813 of February 5, 1999) was undertaken as long as such facts are proved that the activity was within the purview of 'activity that determines, maintains or changes prices' and that limits the competition in the domestic toilet paper distribution market under Item 1 of Paragraph 1 of Article 19 of the former Monopoly Regulation and Fair Trade Act, in situations where the oligopolistic toilet paper manufacturers maintain an identical factory price for a certain amount of time.
[3] In situations where within a oligopolistic market structure the following businesses engage in unilateral copying of the price set by an advance business in setting their own price after the high market share possessing advance businesses set a price based on an independent assessment, the presumption of collaborative acts and agreement under Article 19 Paragraph (5) of the former Monopoly Regulation and Fair Trade Act (which was amended by Law No. 5813 of February 5, 1999) may be rebutted, upon the absence of such special circumstances as is the case where the advance businesses have set their price according to an expectation that following businesses will align their price with that set by advance businesses after such businesses have set their price in accordance with past practices and market condition; nevertheless, the mutual collaborative acts of the following businesses may be a problem in cases where the following businesses have copied the price set by the advance businesses through express or implied agreement or consent, but the existence of mutual collaborative acts among the following businesses must be separately decided according to their market share as well as their influence on price determination.
[4] A case where not only the presumption of collaborative acts under Article 19 Paragraph (5) of the former Monopoly Regulation and Fair Trade Act (which was amended by Law No. 5813 of February 5, 1999) may be rebutted, but also it cannot be presumed that the following businesses agreed to engage in unfair collaborative acts, in a situation where the factory price of toilet paper is at the same level as a result of the following businesses' unilaterally copying the price independently set by advance businesses whose market shares are high in an oligopolistic market structure
[5] A case where the presumption of unfair collaborative acts may not be rebutted on the ground that it is unlikely that the price setting activity of the following businesses unilaterally copied that of the advance businesses, where the date of the internal decision to raise prices as well as the date prices were increased has been set on the same date as a result of the phenomenon of price alignment of the following businesses with the advance businesses in an oligopolistic market structure
【Reference Provisions】[1] Paragraphs 1 and 5 of Article 19 of the former Monopoly Regulation and Fair Trade Act (which was amended by Law No. 5813 of February 5, 1999) / [2] Item 1 of Paragraph 1 and Article 19 Paragraph (5) of the former Monopoly Regulation and Fair Trade Act (which was amended by Law No. 5813 of February 5, 1999) / [3] Item 1 of Paragraph 1 and Article 19 Paragraph (5) of the former Monopoly Regulation and Fair Trade Act (which was amended by Law No. 5813 of February 5, 1999) / [4] Item 1 of Paragraph 1 and Article 19 Paragraph (5) of the former Monopoly Regulation and Fair Trade Act (which was amended by Law No. 5813 of February 5, 1999) / [5] Item 1 of Paragraph 1 and Article 19 Paragraph (5) of the former Monopoly Regulation and Fair Trade Act (which was amended by Law No. 5813 of February 5, 1999)
Article 19 of the former Monopoly Regulation and Fair Trade Act (which was amended by Law No. 5813 of February 5, 1999) (Prohibition of Unfair Collaborative Acts) (1) No enterpriser shall agree with other enterprisers by contract, agreement, resolution, or any other means, jointly engage in any of the acts falling under any of the following items, which unfairly restrict competition (hereafter referred to as the "unfair collaborative acts"):
1. An act of fixing, maintaining or changing the price
2.An act of determining terms and conditions for the transaction of goods or services, or payment of the price thereof
3.An act of restricting production, delivery, transportation, or the transaction of goods or services
4. An act of limiting the territory of trade or customer
5. An act preventing or restricting the establishment or extension of facilities or the installation of equipment necessary for the production of goods or the rendering of services
6. An act of restricting the types or specification of goods at the time of production or transaction of goods
7. An act of establishing a company, etc. to jointly carry out or manage the main parts of business
8.Any practice which practically suppresses competition in a particular business area by means of interfering or restricting the activities or contents of business by other persons.
(2)~(4) <omitted>
(5) Where two or more enterprisers are committing any of the acts listed in each Item of Paragraph 1 which practically restrict competition in a particular business area, they shall be presumed to have committed an unfair collaborative act despite the absence of an express agreement to engage in such act.
【Reference Cases】 [1][2][3][4] Supreme Court Decision 2000Du6107 delivered on May 28, 2002 / [1] Supreme Court Decision 99Du6514, 6521 delivered on March 15, 2002 (Gong2002Sang, 902)
【Plaintiff, Appellant and Appellee】 General successor of Park Hwa-sam, supervisor for the reorganizing stock company Mona Lisa (Attorneys Choi Jung-soo and 2 others, Counsel for plaintiff & appellant-appellee)
【Defendant, Appellee and Appellant】 Fair Trade Commission (Law Firm Woobang, Attorneys Yoo In-eui and 2 others, Counsel for defendant & appellee-appellant)
【Judgment of the court below】 Seoul High Court Decision 98Nu10822 delivered on January 20, 2000
【Disposition】 In the part of the judgment of the court below against plaintiff, the part of the corrective order that was based on finding that the plaintiff in collaboration with Ssang-Yong Paper Corporation and Daehan Pulp Corporation restricted competition in substance by changing retail prices of embossing toilet paper shall be reversed and the corresponding part of this case shall be remanded to the court below. The remaining grounds for appeal by both plaintiff and defendant shall be dismissed. All costs of appeal are assessed against the defendant.
【Reasoning】 1. Judgment on the plaintiff's ground for appeal
A. On the ground for appeal as to misunderstanding of principles of law in the establishment of unfair unilateral activities
If the Fair Trade Commission proves that under Article 19 Paragraph (5) of the former Monopoly Regulation and Fair Trade Act (which was amended by Law No. 5813 dated February 5, 1999) 'more than two enterprisers have engaged in an activity within the purview of each Item of Paragraph 1 of Article 19' and 'actions that, in substance, limit competition within a certain field of transaction,' it is presumed that the enterprises engaged in such collaborative acts without the additional circumstantial facts which prove an express or implied agreement or consent on the part of the enterprises. (See Supreme Court Decision 99Du6514, 6521(consolidated) delivered on March 15, 2002.) On the other hand, since the change in factory price brings about the change in the real transaction price, as the factory price reflects the real transaction price, the activity of more than 2 enterprises determining and maintaining prices is within the purview of 'activity that determines, maintains or changes the price under Item 1 of Paragraph 1 of Article 19, and as long as the activity in which the enterprises maintain the identical factory price ends up affecting or threatening to affect the determination of market price, it falls within the purview 'activity that restricts competition in substance'.
According to such principle of law, the court below has recognized the fact that Mona Lisa Corporation, Yu-Han Kimberly Corporation, Ssang-Yong Paper Corporation (hereinafter these companies will individually be referred to as 'Mona Lisa', 'Yu-Han Kimberly', 'Ssang-Yong Paper', 'Dae-Han Pulp', and as a group the 4 companies will be referred to as the '4 Toilet Paper Companies', while the 3 companies excluding Yu-Han Kimberly will be referred to as the '3 Toilet Paper Companies') have maintained identical factory prices of toilet paper for a certain amount of time when they were occupying the distribution market, such factory price maintenance activity of the 4 Toilet Paper Companies falls within the purview of 'activity that determines, maintains, or changes price' under Item 1 of Paragraph 1 of Article 19, and it is determined that such activity falls under activity that restricts the competition in the domestic toilet paper distribution market. As these facts have been proven, the determination that it is presumed that unfair collaborative acts under Article 19 Paragraph (5) has been undertaken without separate proof of other additional factors or circumstances is proper, and there is no such violation of misunderstanding of the principles of law or the rule of evidence as alleged in the grounds for appeal. Accordingly, this part of the grounds for appeal cannot be accepted.
B. On the ground for appeal as to misunderstanding of principles of law regarding rebuttal of presumption of unfair collaborative acts:
(1) With regard to the plaintiff's allegation that the presumption of the agreement on collaborative acts under Paragraph 5 of Article19 shall be rebutted for reasons that maintaining of identical factory price by the 3 Toilet Paper Companies or 4 Toilet Paper Companies is no more than a simple price copying activity on the part of the following companies Mona Lisa and Dae-Han Pulp in response to the price changing activities of the advance companies that possess a high market share such as Ssang-Yong Paper Yu-Han Kimberly, the court below, ① in spite of the fact that the manufacturing costs of the 4 Toilet Paper Companies are respectively different, and the fact that the influence of fluctuation term and rate in response to fluctuation in the price for raw materials is different depending on the differences in circumstances of managing, distribution structure, sales strategy, and costs of the 4 Toilet Paper Companies, the 4 Toilet Paper Companies lowered or raised the price at or close to the same time by the same amount, in particular, the 3 Toilet Paper Companies' establishment of an identical price on June 1, 1996 and afterwards maintenance of such price for a period of 1 year and 8 months without prior collusion is practically impossible: ② In light of the fact that Mona Lisa was the first to establish a price reduction plan on June 1 1996, when the 3 Toilet Paper Companies first formed an identical factory price for toilet paper, it cannot be said that Mona Lisa, the following corporation, copied the factory price of Ssang-Yong Paper: ③ The informing of price increase to customers on December 23, 1997 by the then representative director of Mona Lisa before the final decision for price increase was made is practically impossible without prior collusion among the 4 Toilet Paper Companies. At the 'conference on the normalization of the transaction order for toilet paper and hygienic products 'for which the 4 Toilet Paper Companies participated in discussions were conducted for the restraint on excessive price competition on the manufacture and sale of toilet paper. Considering the fact that as soon as the defendant started an investigation as to the violation of law by the 4 Toilet Paper Companies at about January of 1998, the factory price that had remained the same among them for over 2 months after mid February of 1998 had changed for each individual company, plaintiff's assertions have been denied on the ground that the toilet paper price of the 4 Toilet Paper Companies was maintained in an identical level merely by the price-copying activity of Mona Lisa.
(2) In situations where within a oligopolistic market structure, the following businesses engages in unilateral copying of the price set by an advance business in setting their own price after the high market share possessing advance businesses set a price based on an independent assessment. The presumption of collaborative acts and agreement under Article 19 Paragraph (5) of the former Monopoly Regulation and Fair Trade Act (which was amended by Law No. 5813 of February 5, 1999) upon the absence of such special circumstances, as is the case where the following businesses have set their price according to an expectation that following businesses will align their price with that set by advance businesses after the advance businesses have set their price in accordance to past practices and market condition, nevertheless, the mutual collaborative acts of the following businesses may be a problem in cases where the following businesses have copied the price set by the advance businesses through express or implied agreement or consent, but the existence of mutual collaborative acts among the following businesses must be separately decided according to their market share as well as their influence on price determination.
(3) This part of the court below's decision is examined under such principle of law.
(A) The first price reduction and increase
Returning to this case, it can be accounted that, ① as soon as the price for pulp and old paper which are raw materials for toilet paper saw a drastic reduction in 1995, the government issued an administrative order to the 4 Toilet Paper Companies to lower their prices, as the highest market share possessing Yu-Han Kimberly and Ssang-Yong Paper were the first to set a factory price reduction policy as to toilet paper (containing 18 rolls, standard 70~75 m, the same below), Yu-Han Kimberly unofficially set their price at 8,261 won, while Ssang-Yong unofficially set their price at 8,448 won, Mona Lisa and Dae-Han Pulp who observed the result of the agreement between Yu-Han Kimberley, Ssang-Yong Paper and the government, copied the price of Ssang-Yong Paper unofficially, accordingly, the 3 Toilet Paper Companies identically lowered the factory price of toilet paper to 8,448 won on June 1, 1996 (hereinafter referred to as the 'first price reduction'): ② afterwards, when Mona Lisa set their price at 8,866 won with the introduction of their new product in March 1, 1997, Mona Lisa raised the price of their existing product to 8,866 won on May 1, 1997, while Dae-Han Pulp also raised their price to 8,866 won with the introduction of their new product on May 10, 1997 (hereinafter referred to as the 'first price increase').
The setting of an identical factory price by the 3 Toilet Paper Companies in the first price reduction was the result of the following corporations Mona Lisa and Dae-Han Pulp's unilateral copying of the price set by advance corporation Ssang-Yong Paper. Additionally, the unilateral copying of price by Mona Lisa and Dae-Han Pulp 2 months, after Ssang-Yong Paper increased the price of their new product in the first price increase, forms the appearance that the 3 Toilet Paper Companies engaged in unfair collaborative acts. Also considering the characteristics and circumstances of the toilet paper distribution market, the distribution structure and price decision structure, the position of the 3 Toilet Paper Companies possess in such market, past records of price copying and the political economic background at the time as recognized in this case as a whole, the first price reduction and first price increase seem to be nothing more than a simple price copying activity. A presumption of agreement to engage in collaborative acts by the 3 Toilet Paper Companies in this portion is viewed as rebutted. On the other hand, even though Mona Lisa and Dae-Han Pulp coordinated their actions in maintaining identical prices in the first price reduction and first price increase, it is difficult to find that they jointly agreed to engage in activities for which they would set and maintain an identical price. Additionally, as the price matching activity for which they engaged in cannot be viewed as activity that will bring about the restriction of competition in substance considering the market share which Mona Lisa and Dae-Han Pulp possess, it cannot be presumed that they agreed to engage in collaborative acts.
It follows from the foregoing that the court below made reversible errors. The court violated the rules of evidence which affected the judgment by misunderstanding the principle of law of unfair collaborative acts by excluding this part of the ground for appeal that asks for the rebuttal of the presumption that the plaintiff engaged in unfair collaborative acts, based on the reasoning in its judgment. The ground for appeal pointing this out is justified.
(B) The second and third price increase
Observing this case, it can be accounted that as soon as Yu-Han Kimberley increased the factory price of toilet paper to 9,306 won on July 17, 1997, the 3 Toilet Paper Companies raised the price of toilet paper as a result of their experience in price alignment according to the price copying in the first price reduction and first price increase (hereinafter referred to as the 'second price increase'), subsequently, as soon as Yu-Han Kimberley decided to raise the price of toilet paper to 10,494 won on December 24, 1997 and increased the price, the 3 Toilet Paper Companies simultaneously increased their price to 10,494 won a day before on December 23, 1997 (hereinafter referred to as the 'third price increase'). Unlike the first price reduction and first price increase, in the second and third price increase, the phenomenon of price alignment intensified as the date of internal consultations for the decision of price increase occurred at the same time while the real price increase occurred on the same day, and this kind of phenomenon is attributable to the characteristic of the distribution structure in which manufacturers may indirectly exchange information regarding the price decisions which is the result of the characteristic of the distribution structure in which toilet paper manufacturers notifies the distributors of price changes in advance. In light of such circumstances, even considering the characteristic of the toilet paper market and the factors of change in each stage of price change which the plaintiff asserts, it is difficult to find that following corporations Mona Lisa and Dae-Han Pulp unilaterally copied the price of an advance corporation Ssang-Yong Paper in the second and third price increase. Other circumstances that may rebut the presumption of unfair collaborative acts cannot be recognized separately.
It follows from the foregoing that the denial by the court below of the plaintiff's argument that the presumption of unfair collaborative acts was rebutted as to the second and third price increase is consequentially correct, and there was no error against the rules of evidence selection as alleged by the plaintiff. Accordingly, this part of the grounds for appeal cannot be accepted.
2. Judgment on the defendant's ground for appeal
The defendant failed to make an entry of grounds for appeal in the petition for appeal, and also failed to submit an appellate brief within 20 days of reception of notification of acceptance of the trial record.
3. Conclusion
Therefore, among the part of the judgment of the court below against plaintiff, the part of the corrective order that was based on the part of the judgment of the court below in which the plaintiff, from June 1, 1996 through July 31, 1997, with Ssang-Yong Paper corporation and Dae-Han Pulp corporation was actually engaged in the restriction of competition in the domestic toilet paper distribution market by jointly changing sales price of embossing toilet paper shall be reversed, and the corresponding part of this case shall be remanded to the court below. The remaining grounds for appeal by the plaintiff and the appeal by the defendant are dismissed and all costs of appeals are assessed as per Disposition.
Justices Bae Ki-won (Presiding Justice)
Suh Sung (Justice in charge)
Lee Yong-woo
Park Jae-yoon
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