[edit] Supreme Court Decision 97Nu19427 delivered on June 9, 2000 [Revocation of a Corrective Order]

【Main Issues】

[1] The legislative intent and criteria of decision on 'the enterpriser's abusive behavior of the advantageous position' which constitutes a type of the unfair trade practices according to Article 6(4) of the Decree No. 1995-6 of the Fair Trade Commission which was based on Item 4 of Paragraph (1) of Article 23 and Article (2) of the previous Monopoly Regulation and Fair Trade Act

[2] A case that Supreme Court reversed the decision of the court below which ruled that it is not the enterpriser's abusive behavior of the advantageous position that milk manufacturing & selling company did not approve transfer of agency status by reasons of the agent's one-time absence at agents' meeting, absence at two day factory tour and negligent delivery to some customers and low sales volume, etc.

【Summary of Decision】

[1] Paragraph (1) Item 4 and Paragraph (2) of Article 23 of the previous Monopoly Regulation and Fair Trade Act (amended by Law No. 5235 of December 30, 1997) and Item 4 of Article 6 of the Notice No. 1995-6 of the Fair Trade Commission which was based on the previous Monopoly Regulation and Fair Trade Act define 'the enterpriser's abusive behavior of the advantageous position' as a type of the unfair trade practices for the legislative intent that the enterpriser of comparatively advantageous position should be prohibited from giving the other party transactional disadvantage by abusing his position, thus it establishes a fair trade between transactional parties who are differently situated economically. When determining whether a position is advantageous, the following factors should be considered: ① market conditions, ② the differences between the parties' abilities to conduct business, and ③ the characteristics of the goods which are the object of transaction. To determine whether a behavior of a party resulted in a transactional disadvantage to the other party by using his position, we should consider the factors such as intention, objective, effect and influence of the behavior, characteristics of the goods, situation of transaction, degree of the prevailing position of the enterpriser, and contents and degree of disadvantage of the other party. Furthermore, whether there was a deviation from the practice of normal transaction and whether it may impede a fair trade should be considered.

[2] The case that Supreme Court reversed the decision of the court below which ruled that it is not the enterpriser's abusive behavior of the advantageous position that milk manufacturing & selling company did not approve transfer of agency status by reasons of the agent's one-time absence at agents' meeting, absence at two day factory tour and negligent delivery to some customers and low sales volume, etc.

【Reference Provisions】[1] Article 23 Paragraph (1) Item 4 and Article 2 of the previous Monopoly Regulation and Fair Trade Act (amended by Law No. 5235 of December 30, 1996) / [2] Article 23 Paragraph (1) Item 4 and Article 2 of the previous Monopoly Regulation and Fair Trade Act (amended by Law No. 5235 of December 30, 1996)

Article 23 of the previous Monopoly Regulation and Fair Trade Act (amended by Law No. 5235 of December 30, 1996) (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.~3. <omitted>

4. An act of making a trade with a certain transacting partner by unfairly taking advantage of his position in trade

5.~8. <omitted>

(2) The categories or standards for unfair trade practices shall be determined by the Presidential Decree.

【Reference Cases】[1] Supreme Court Decision 96Nu18489 delivered on March 27, 1998 (Gong1998Sang, 1216), Supreme Court Decision 96Nu9003 delivered on September 8, 1998 (Gong1998Ha, 2430)

【Plaintiff, Appellee】Pasteur Dairy Industry Co. (Attorney Yun Seung- young, Counsel for plaintiff-appellee)

【Dependant, Appellant】The Fair Trade Commission (Attorneys Lee Jae-hoo & 1 other, Counsel for defendant-appellant)

【Supplementary Intervenor for Defendant】 Jung Chang-hee

【Judgment of the Court Below】 Seoul High Court Decision 96Gu25137 delivered on November 4, 1997

【Disposition】 The judgment of the court below shall be reversed and the case shall be remanded to the Seoul High Court.

【Reasoning】 The grounds for appeal are examined as follows.

1. According to reasoning of the court below, it found that; the plaintiff, a manufacturer of dairy products, is "an enterpriser" as defined by the Monopoly Regulation and Fair Trade Act, because it supplied dairy products to an exclusive agent and made a new contract by providing an option to renew the contract or by approving transfer of an agency according to the agent's choice at the end of the contractual term; in the meantime, the plaintiff made a one-year contract of agency as of May 23, 1995 with the supplementary intervenor for the defendant(hereinafter referred to as 'the intervenor') who succeeded agency status from the ex-agent in the price of 93 million won and commenced agent transaction; but the plaintiff notified to the intervenor that it would not renew the contract when it ended for the reasons that the intervenor did not attend the monthly agent's meeting in October, 1995, did not participate in the factory-tour on October 4, and 5 and failed to deliver milk to 5 consumers; the plaintiff actually rejected the renewal of the contract after a year with an excuse of agent's low sales and did not approve the intervenor's succession of agency status. The court below held "judging from the contents and the transaction type of the contract made by both parties, the plaintiff was in the advantageous position against the intervenor in transaction. However, generally speaking, a material-providing company has a right to decide who is appropriate for the agency and whether it makes a contract with him or her by considering his or her business ability, reliance, capability of providing finance and security. It is entirely up to the plaintiff unless its selection is unacceptable in light of social common sense such as unjust refusal of transaction or discriminative treatment, etc. Although the intervenor lost the chance to recover the invested capital because the plaintiff refused the intervenor's succession of the agency, it is difficult to say that this act falls under the definition of an enterpriser's abusive behavior of the advantageous position as is regulated under Article 23 of the Monopoly Regulation and Fair Trade Act. Therefore, for the above reasons, the judgment of the court of first instance dated July 10, 1996 was reversed as the plaintiff company's ground for appeal asserting the correction order and its announcement should be revoked was accepted.

2. However, Paragraph (1) Item 4 and Paragraph (2) of Article 23 of the previous Monopoly Regulation and Fair Trade Act (amended by Law No. 5235 of December 30, 1997) and Item 4 of Article 6 of the Notice No. 1995-6 of the Fair Trade Commission which was based on the previous Monopoly Regulation and Fair Trade Act define 'the enterpriser's abusive behavior of the advantageous position' as a type of the unfair trade practices for the legislative intent that the enterpriser of comparatively advantageous position should be prohibited from giving the other party transactional disadvantage by abusing his position, thus it establishes a fair trade between transactional parties who have different economic capabilities. When determining whether a position is advantageous, the following factors should be considered: ① market conditions, ② the differences between the parties' abilities to conduct business, and ③ the characteristics of the goods which are the object of transaction. To determine whether a behavior of a party resulted in a transactional disadvantage to the other party by using his position, we should consider the factors such as intention, objective, effect and influence of the behavior, characteristics of the goods, situation of transaction, degree of the prevailing position of the enterpriser, and contents and degree of disadvantage of the other party. Furthermore, whether there was a deviation from the practice of normal transaction and whether it may impede a fair trade should be considered.

However, if we examine the reasoning of the court below in light of records, the court below, while admitting the plaintiff's advantageous position against the defendant, failed to understand what the agent's one time absence at the agents' meeting, absence at the factory tour, negligent delivery and low sales etc. means. It should be considered whether they are just the factors to be considered as secondary matters but they constitute so serious transactional breach that the plaintiff, a corporation, may not approve the intervenor's succession of the position of agent allowed for the existing agent's recovery of the invested capital. It should be determined wether they constitute the improper abuse of the prevailing position, considering the plaintiff's intention and objective of rejecting the intervenor's succession of the agent status for the reasons above, its effect and influence, the extent of the plaintiff's advantageous position and the contents and extent of the intervenor's disadvantage caused by the plaintiff's rejection. The court below erred in making its decision solely based on the freedom of contract. There were reversible errors in matters of law by misunderstanding the principle of law on the abusive behavior of the prevailing position which is the unfair trade or lacked the necessary review or incomplete trial. The ground for appeal pointing this out is justified.

3. Therefore the judgment of the court below shall be reversed and the case shall be remanded for retrial and determination. This decision is delivered with the assent of all Justices who heard the appeal as per Disposition.

The Justices Lee Yong-hun (Presiding Justice)

Kim Hyoung-sun

Cho Moo-jeh

Lee Yong-woo (Justice in charge)

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