[edit] Supreme Court Decision 2000Du833 delivered on December 11, 2001 [Revocation of Disposition of a Corrective Order, etc.]
【Main Issues】
[1] The legislative intent of prescribing 'discrimination in favor of affiliates' under Item 2 Subparagraph (Da) [Schedule] in Article 36 Paragraph (1) of the previous Enforcement Decree of the Monopoly Regulation and Fair Trade Act (MRFTA) as constituting the unfair trade practice unless there exists a justifiable reason, unlike other discriminatory conducts stated under Item 2 Subparagraph (Ga), (Na) and (Ra)
[2] A case upholding the court below's judgment that prepayment by the Korea National Housing Corporation to its affiliated companies which it acquired following the government's policy does not constitute 'discrimination in favor of affiliates' as stated under Item 2 Subparagraph (Da) [Schedule] in Article 36 Paragraph (1) of the previous Enforcement Decree of the MRFTA
[3] Conditions required in order to constitute 'imposing disadvantages' as stated in Item 6 Subparagraph (Ra) [Schedule] in Article 36 Paragraph (1) of the previous Enforcement Decree of the MRFTA and criteria for judging whether to meet the conditions
[4] A case ruling that Korea National Housing Corporation's reserving payments to contractors until the completion of the comprehensive performance test, withholding the payment for approximate costs of preliminary constructions, and requesting to pay indemnities for failure to observe the date for mid-inspection of the construction progress, do not constitute 'imposing disadvantages' under Item 6 Subparagraph (Ra) [Schedule] in Article 36 Paragraph (1) of the previous Enforcement Decree of the MRFTA
【Summary of Decision】
[1] Article 23 (1) of the previous Monopoly Regulation and Fair Trade Act (amended by Law No. 5813 of February 5, 1999) states 'an act of discriminating against a certain transacting partner' as an example of practices which are likely to impede fair trade (hereinafter referred to as 'unfair trade practices'), and Paragraph (2) stipulates that the categories or standards for unfair trade practices shall be determined by the Presidential Decree. Item 2 Subparagraph (Da)[Schedule] in Article 36 Paragraph (1) of the previous Enforcement Decree of the MRFTA (amended by Presidential Decree No. 16221 of March 31, 1999) states the 'discrimination in favor of affiliates' as an unfair trade practice stated in Article 23(1)1 of the MRFTA, and prescribes it as 'an act of making the terms and conditions of trades such as price, quantity, or quality remarkably advantageous or disadvantageous in order to provide advantages to affiliates without any justifiable reason.' Item 2 Subparagraphs (Ga), (Na), and (Ra) [Schedule] in Article 36 Paragraph (1) of the same Enforcement Decree stated that 'discrimination of price,' 'discrimination of trade terms and conditions,' and 'discrimination of groups' constitutes unfair trade practices only when performed 'unfairly.' On the other hand, Item 2 Subparagraph (Da) in the same [Schedule] states that 'discrimination in favor of affiliates' constitutes an unfair trade practice unless there is a justifiable reason for such a practice. The legislative intent of this different style of provision is that: such a conduct may sustain the existence of enterprise groups' uncompetitive affiliates which will harm the effectiveness of the economy and cause additional concentration of economic power, and thereby is more likely to impede fair trade compared to other types of discrimination conducts; therefore, if an act apparently conforms with such a conduct, the act will automatically be deemed to be in danger of impeding fair trade and the party who has performed the act shall be burdened with the proof of proving otherwise.
[2] A case upholding the court below's judgment that prepayment by the Korea National Housing Corporation to its affiliated companies which it acquired following the government's policy does not constitute 'discrimination in favor of affiliates' as stated in Item 2 (Da) in [Schedule] stated under Article 36(1) of the previous Enforcement Decree of the MRFTA
[3] Article 23 Paragraph (1) of the previous Monopoly Regulation and Fair Trade Act (amended by Law No. 5813 of February 5, 1999) states, in Item 4, 'an act of making a trade with a certain transacting partner by unfairly taking advantage of his position in trade' as an unfair trade practice. Pursuant to Paragraph (2) of the same Article, the previous Enforcement Decree of the MRFTA (amended by Presidential Decree No. 16221 of March 31, 1999) described the categories or standards for unfair trade practices. In addition, Item 6 Subparagraph (Ra) [Schedule] in Article 36 Paragraph (1) of the previous Enforcement Decree states 'provision of disadvantages' (i.e. 'an act of setting or changing the terms of business to the disadvantage of the transacting partner in ways other than those stated in Subparagraphs (Ga) through (Da), and giving disadvantages in the process of transaction') also as a practice stated in Article 23 (1) of MRFTA. Accordingly, the mere fact that a practice is somewhat disadvantageous to the other party is not sufficient for a practice to constitute an 'imposing disadvantages' as described in Item 6 (Ra). In order for a practice to constitute 'imposing disadvantages,' terms of trade must be set or changed by inappropriate use of business status, equal in effect to the acts prescribed in (Ga) through(Da), i.e. forcing of purchase, forcing of profit payment, forcing of sales figures, etc. and such an act must potentially impede fair trade by inappropriately giving disadvantages to the other party, in light of the field's trade customs. Moreover, the decision of whether an act inappropriately gives disadvantages to the other party must be based on the overall consideration of the following matters; the contents and probability of the disadvantages that might occur to the other party due to the terms of business in question; the extent of limitations on competition that will arise between the parties in their ordinary business transactions; the business customs and business forms in the related field; the effect on the general order of competition, and; the provisions in the relevant acts and statutes.
[4] A case holding that Korea National Housing Corporation's reserving payments to contractors until the completion of the comprehensive performance test, withholding the payment for approximate costs of preliminary constructions and requesting to pay indemnities for failure to observe the date for mid-inspection of the construction progress do not constitute 'imposing disadvantages' under Item 6 (Ra) [Schedule] in Article 36(1) of the previous Enforcement Decree of the MRFTA
【Reference Provisions】[1] Item 1 of Paragraph (1) and Paragraph (2) of Article 23 of the previous Monopoly Regulation and Fair Trade Act(MRFTA) (amended by Law No. 5813 of February 5, 1999), [Schedule] Item 2 Subparagraph (Da) of Paragraph (1) of Article 36 of the previous Enforcement Decree of the MRFTA (amended by Presidential Decree No. 16221 of March 31, 1999) / [2] Item 1 of Paragraph (1) and Paragraph (2) of Article 23 of the previous MRFTA (amended by Law No. 5813 of February 5, 1999), [Schedule] Item 2 Subparagraph (Da) of Paragraph (1) of Article 36 of the previous Enforcement Decree of the MRFTA (amended by Presidential Decree No. 16221 of March 31, 1999) / [3] Item 4 of Paragraph (1) and Paragraph (2) of Article 23 of the previous MRFTA (amended by Law No. 5813 of February 5, 1999), [Schedule] Item 6 Subparagraph (Ra) of Paragraph (1) of Article 36 of the previous Enforcement Decree of the MRFTA (amended by Presidential Decree No. 16221 of March 31, 1999) / Item 4 of Paragraph (1) and Paragraph (2) of Article 23 of the previous MRFTA (amended by Law No. 5813 of February 5, 1999), [Schedule] Item 6 Subparagraph (Ra) of Paragraph (1) of Article 36 of the previous Enforcement Decree of the MRFTA (amended by Presidential Decree No. 16221 of March 31, 1999)
Article 23 of the previous Monopoly Regulation and Fair Trade Act (amended by Law No. 5813 of February 5, 1999) (Prohibition of Unfair Trade Practices) (1) No enterpriser shall commit any act which falls under any of the following items, and which is likely to impede fair trade (hereinafter referred to as "unfair trade practices"), or make an affiliated company or other enterprisers perform such an act
1. An act of unfairly refusing any transaction, or discriminating against a certain transacting partner
2.~7. <omitted>
(2) The categories or standards for unfair trade practices shall be determined by the Presidential Decree.
(3)~(5) <omitted>
Article 36 of The previous Enforcement Decree of the Monopoly Regulation and Fair Trade Act (amended by Presidential Decree No. 16221 of March 31, 1999) (Designation of Unfair Trade Practices) (1) Categories or standards of unfair trade practices in accordance with the provisions of Article 23 (2) of the Act shall be as set out in the Schedule 1.
(2) <omitted>
[Schedule] Types and Criteria of General Unfair Trade Practices (Regarding Paragraph (1) of Article 36)
2. Discriminatory Acts
"An act of unfairly discriminating against a certain transacting partner" stated in Article 23 (Prohibition of Unfair Trade Practices), Paragraph (1), Item 1 of the Act is any of the following acts.
(Ga) - (Na) <omitted>
(Da) Discrimination in favor of affiliates
An act that, for the purpose of giving advantage to an affiliated company without justifiable reason, makes the terms and conditions of business such as price, quantity or quality or the contents of business distinctively advantageous or disadvantageous.
(Ra) <omitted>
6. Abuse of Trade Status
(Ga) - (Da) <omitted>
(Ra) Provision of disadvantages
An act of setting or changing the terms of business to the disadvantage of the transacting partner in ways other than those stated in (Ga) through (Da), and giving disadvantages in the process of transaction.
(Ma) <omitted>
【Reference Cases】[3] Supreme Court Decision 96Nu18489 delivered on March 27, 1998 (Gong1998Sang, 1216)
【Plaintiff, Appellee】 Korea National Housing Corporation (Law Firm Barun Byopryul, Attorney Chung Gui-ho, Counsel for plaintiff-appellee)
【Defendant, Appellant】Fair Trade Commission (Attorneys Hwang Sang-hyun and 2 others, Counsel for defendant-appellant)
【Judgment of the court below】 Seoul High Court Decision 99Nu1177 delivered on December 15, 1999)
【Disposition】 The appeal shall be dismissed. All costs of this appeal are assessed against the defendant-appellant.
【Reasoning】 The grounds for appeal are examined as follows.
1. With respect to a discriminatory act in favor of an affiliated company
Article 23 (1 ) of the previous Monopoly Regulation and Fair Trade Act (amended by Law No. 5813 of February 5, 1999) states 'an act of discriminating against a certain transacting partner' as an example of practices which are likely to impede fair trade (hereinafter referred to as 'unfair trade practices'), and Paragraph (2) stipulates that the categories or standards for unfair trade practices shall be determined by the Presidential Decree. Item 2 Subparagraph (Da) in the [Schedule] stated under Article 36 Paragraph (1) of the previous Enforcement Decree of the MRFTA (amended by Presidential Decree No. 16221 of March 31, 1999 ) states the 'discrimination in favor of affiliates' as an unfair trade practice stated in Article 23(1)1 of the MRFTA, and prescribes it as 'an act of making the terms and conditions of trades such as price, quantity, or quality remarkably advantageous or disadvantageous in order to provide advantages to affiliates without any justifiable reason'. Item 2 Subparagraphs (Ga), (Na), and (Ra) in the [Schedule] stated in Article 36 Paragraph (1) of the same Enforcement Decree stated that 'discrimination of price', 'discrimination of trade terms and conditions', and 'discrimination of groups' constitutes unfair trade practices only when performed 'unfairly'. On the other hand, Item 2 Subparagraph (Da) in the same [Schedule] states that 'discrimination in favor of affiliates' constitutes an unfair trade practice unless there is a justifiable reason for such a practice. The legislative intent of this different style of provision is that: such a conduct may sustain the existence of enterprise groups' uncompetitive affiliates which will harm the effectiveness of the economy and cause additional concentration of economic power thereby being more likely to impede fair trade compared to other types of discrimination conducts; therefore, if an act apparently conforms with such a conduct, the act will automatically be deemed to be in danger of impeding fair trade and the party who has performed the act shall be burdened with the proof of proving otherwise.
According to the reasoning of the court below, it found the following facts: the sequence of events in which the plaintiff, following the government's policy, acquired three companies including Hanyang Ltd. (hereinafter referred to as 'Companies'), and went on to sublease funds or make guarantees of payment in accordance with the Financial Support Order; the process of gaining approval as an exception to the conclusion and execution of a private contract, and executing it; the contents of the private contract; the circumstances which led to the decision and execution of pre-payment to the Companies due to the possibility of setbacks in business management from financial difficulties arising from the funds that had been committed beforehand for the purchase of materials and expenses during the process of production, and the fact that most of the Companies' production material were the construction's completion materials when there was a long time interval between the time the orders were placed, delivered and installed; the extent of the liabilities from loans, subleases, or guarantees of payment that the plaintiffs had received on behalf of the Companies. Upon these findings, the court below held that the plaintiff's act of prepayment to the Companies which were acquired as affiliates, were within the boundaries of the approval of private contract and the Financial Support Order that the government gave to the plaintiff for the purpose of normalizing business management of the Companies which were insolvent enterprises; moreover, there existed a legislative intent for the public interest of providing for social, economic stability by preventing social problems such as mass civil petitions, mass lay-offs, and chain-reaction bankruptcies of material providers or subcontractors that might result from the repeated bankruptcy of the Companies. Additionally, it is appropriate to view the act as being as an inevitable, minimum action performed to prevent accompanied bankruptcy of the plaintiff, who had made subleases and guarantees in excess of 100 billion won to the Companies. Therefore, the act cannot be seen as an act of discrimination in favor of an affiliated company.
In light of relevant acts, statutes and the above legal reasoning, the court below's judgment is justified in examining the plaintiff's act of pre-payment to the Companies to be apparently a 'discrimination in favor of affiliated companies' and determining that the plaintiff has proven that its act does not potentially impede fair trade, and thereby ruling the act as not being unlawful. This judgment can be affirmed as legitimate, and there are no reversible errors of violating the rules of evidence, miscomprehension of principles concerning the discrimination in favor of affiliated Companies or legitimate acts in accordance with acts and statutes, that affects the conclusion of the judgment. Therefore, the ground for appeal on this issue is not justified.
2. With respect to imposing disadvantages
Article 23 (1) of the previous Monopoly Regulation and Fair Trade Act (amended by Law No. 5813 of February 5, 1999) states, in Item 4, 'an act of making a trade with a certain transacting partner by unfairly taking advantage of his position in trade' as an unfair trade practice. Pursuant to Paragraph (2) of the same Article, the previous Enforcement Decree of the MRFTA (amended by Presidential Decree No. 16221 of March 31, 1999) described the categories or standards for unfair trade practices. In addition Item 6 Subparagraph (Ra) in the [Schedule] stated in Article 36 Paragraph (1) of the previous Enforcement Decree states 'imposing disadvantages' (i.e. 'an act of setting or changing the terms of business to the disadvantage of the transacting partner in ways other than those stated in Subparagraphs (Ga) through (Da), and giving disadvantages in the process of transaction') also as a practice stated in Article 23 (1) of MRFTA. Accordingly, the mere fact that a practice is somewhat disadvantageous to the other party is not sufficient for a practice to constitute an 'imposing disadvantages' as described in Item 6 (Ra). In order for a practice to constitute 'imposing disadvantages,' terms of trade must be set or changed by inappropriate use of business status, equal in effect to the acts prescribed in (Ga) through(Da), i.e. forcing of purchase, forcing of profit payment, forcing of sales figures, etc. and such an act must potentially impede fair trade by unjustifiably giving disadvantages to the other party, in light of the field's trade customs. Moreover, the decision of whether an act gives unjustifiably disadvantages to the other party must be based on the overall consideration of the following matters; the contents and probability of the disadvantages that might occur to the other party due to the terms of business in question; the extent of limitations on competition that will arise between the parties in their ordinary business transactions; the business customs and business forms in the related field; the effect on the general order of competition and the provisions in the relevant acts and statutes. (See Supreme Court Decision 96Nu18489 delivered on March 27, 1998.)
According to the records, the following facts can be acknowledged: (1) in concluding a product purchase contract with the product providers, the 'purchase specification' stated that for products such as overall preparation materials, generator, elevator and lighting equipments, etc., only 80% of the payment would be paid upon delivery of material and inspection of installments, and the remaining 20% would be paid upon the completion of the overall performance test that was to be taken place after the completion of the outer electrical constructions of the building; (2) in case of urgent constructions that cannot wait until the modification of the construction plan and the conclusion of an alteration contract resulting from change of circumstances during the construction process after the conclusion of the construction contract, the portion of the construction constructed prior to the modification of the plan and without the approval of the plaintiff, were not recognized as established parts until such modifications to the plan were made, but were to be recognized as established parts only after the modifications of the plan and adjustment of agreed payment had been made and payment were made only afterwards; (3) the plaintiff introduced a 'halfway construction progress control system' since 1996 and imposed it within a limited test area, imposing upon the contracting party who fails to observe the date limit for the completion of the framework construction including the top story, a 100,000 won per day penalty for each building if there were to be a delay of construction, thereby in effect resulting in disadvantageous contract conditions for the other party or resulting in disadvantages during the process of executing according to the contract. However, taking into consideration various circumstances mentioned in the records, such as the contents of disadvantages and probability of its occurrence, the extent of the limitations on competition that might affect the contracting party's ordinary business transactions, the business custom and the business form in the relevant business field, the effect on the general order of competition, and the Reference Provisions, etc., the plaintiff's act cannot be seen as establishing or altering the terms of business through inappropriate use of business status, nor providing disadvantages equal in extent to conducts such as forcing purchase, forcing profitable payment, forcing sales goals, etc. in light of normal business customs, and therefore cannot be judged to potentially impede fair trade.
Although the court below's reasoning is somewhat different, the conclusion that the plaintiff's act does not constitute an 'imposing disadvantages,' is justified, and there is no illegality of incomplete trial, misunderstanding of principles, or contradictory reasoning that has affected the conclusion of the judgment, as has been alleged in the ground for appeal. The ground for appeal concerning this issue cannot be accepted.
3. With respect to defective reasoning
In the judgment of the court below, the court below specified that the plaintiff did not dispute some part of the disposition such as the partial corrective order, etc., and therefore it revoked the corrective order as a whole based on the ground that fines cannot be apportioned according to specific violations. Accordingly, since the defendant can calculate the surcharge and give a levy order pertaining to the part of the disposition that the plaintiff did not dispute after the judgement of this case has been rendered, there is no defective reasoning in omitting this in the judgment. The ground for appeal concerning this issue also cannot be accepted.
4. Therefore, the appeal shall be dismissed. All costs of the appeal are assessed against the losing party. This decision is delivered with the assent of all Justices who heard the appeal as per Disposition.
Justices Song Jin-hun (Presiding Justice)
Byun Jae-seung
Lee Kyu-hong (Justice in charge)
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