[edit] Supreme Court Decision 99Du4686 delivered on June 12, 2001 [Revocation of a Corrective Order, etc.]
【Main Issues】
[1] The criteria of judgement on what constitutes 'unfair bargain' provided in Item 3 Subparagraph (Ga)[Schedule] of Article 36 Paragraph (1) of the previous Enforcement Decree of Monopoly Regulation and Fair Trade Act
[2] A case that the behavior of low-price bid did not come under 'unfair bargain in transaction etc.' in the latter part of Item 3 Subparagraph(Ga) [Schedule] of Article 36 Paragraph (1) of the previous Enforcement Decree of Monopoly Regulation and Fair Trade Act on the ground that there lacked unfairness where an enterpriser of system unification who made a low price bid far below the lowest labor cost was awarded a contract in the competitive bidding of the service business for the unification of local information system
[3] The criteria to meet the 'fear of excluding a competitor' provided in the Item 3 Subparagraph (Ga)[Schedule] of Article 36 Paragraph (1) of the previous Enforcement Decree of Monopoly Regulation and Fair Trade Act and the scope of such competitor
【Summary of Decision】
[1] Article 23 Paragraph (1) of the previous Monopoly Regulation and Fair Trade Act (amended by Law No. 5813 of February 5, 1999) enumerates 'An act of unfairly excluding competitors' as one of the practices which are likely to impede fair trade and Paragraph (2) Item 2 of the same Article provides to decide the type of its Subparagraph (Ga) of Article 36 Paragraph (1) of the previous Enforcement Decree of Monopoly Regulation and Fair Trade Act (amended by the Presidential Decree No. 16221 of March 31, 1999) provides unfair bargain as one of the types of practice conforming to Paragraph (1) of Article 23 of the previous Monopoly Regulation and Fair Trade Act and defines it as 'the practices which are likely to exclude competitor of one's own or subsidiary company by continuously supplying products or service at a strikingly lower price than the cost necessary for supply without any good reason or by supplying products or service at a unjust lower price'. A so-called continuously transactional unfair bargain under the former part of Item 3 Subparagraph (Ga)[Schedule] indicates the enterpriser's continuous supply of products or service at an unreasonably low price. If it appears that a practice falls under this category, it will likely to be considered as impeding fair trade 'without any good reason.' However, so-called continuous transactional unfair bargain prescribed under the latter part of Item 3 Subparagraph (Ga)[Schedule] shows that justified supply of products or service at a low price is hardly considered an impediment to fair trade in itself. As a result, supply of products or service at a low price is an act impeding fair trade only when it is done 'unjustly.' Whether there is unfairness should be decided according to the possibility of impeding fair trade after overall review of various factors in a given situation, such as intention and objective of each unfair bargain, the extent of low price, the possibility of repetition, the characteristics of products or services in unfair bargain and its market situation, the behavior's position in market, the effect on competitors, etc.
[2] The court's ruling that the behavior of low-price bid did not come under 'unfair bargain in transaction etc.' in the latter part of Item 3 Subparagraph(Ga) [Schedule] of Article 36 Paragraph (1) of the previous Enforcement Decree of Monopoly Regulation and Fair Trade Act (amended by the Presidential Decree No. 16221 of March 31, 1999) on the ground that there lacked unfairness where an enterpriser of system unification who made a low price bid far below the lowest labor cost was awarded a contract in the competitive bidding of the service business for the unification of local information system.
[3] A competitor of Item 3 Subparagraph (Ga)[Schedule] of Article 36 of the previous Enforcement Decree of Monopoly Regulation and Fair Trade Act (amended by the Presidential Decree No. 16221 of March 31, 1999) generally comprises the one who has practically competitive relationship but, in light of the Act's legislative intent to prevent the abuse of market controlling position which is prohibited by the same Act (amended by Law No. 5813 of February 5, 1999), we should see that a potential enterpriser who is expected to enter the market can also be included within the scope of the competitor. The fear of excluding the competitor does not make it necessary to actually exclude the competitor. It is enough to acknowledge the abstract risk of its happening. Therefore, the existence of the fear of excluding the competitor should be decided after overall examination of various factors in a given situation, such as intention and objective of each unfair bargain, the extent of the low price, the scale of practicer's enterprise and position in the market, and the enterpriser's situation influenced by bargain sale.
【Reference Provisions】[1] Paragraph (1) Item 2 and Paragraph (2) of Article 23 the previous Monopoly Regulation and Fair Trade Act (amended by Law No. 5813 of February 5, 1999); [Schedule] Item 3 Subparagraph (Ga) of Article 36 Paragraph (1) of the previous Enforcement Decree of Monopoly Regulation and Fair Trade Act (amended by the Presidential Decree No. 16221 of March 31, 1999) / [2] Paragraph (1) Item 2 and Paragraph (2) of Article 23 the previous Monopoly Regulation and Fair Trade Act (amended by Law No. 5813 of February 5, 1999); [Schedule] Item 3 SubParagraph (Ga) of Article 36 Paragraph (1) of the previous Enforcement Decree of Monopoly Regulation and Fair Trade Act (amended by the Presidential Decree No. 16221 of March 31, 1999) / [3] Paragraph (1) Item 2 and Paragraph (2) of Article 23 the previous Monopoly Regulation and Fair Trade Act (amended by Law No. 5813 of February 5, 1999); [Schedule] Item 3 Subparagraph (Ga) of Article 36 Paragraph (1) of the previous Enforcement Decree of Monopoly Regulation and Fair Trade Act (amended by the 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. <omitted>
2. An act of unfairly excluding competitors
3.~8. <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 Monopoly Regulation and Fair Trade Act (amended by the 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 1]
The type and criteria of general Unfair Trade Practices (regarding Paragraph (1) of Article 36)
1.~2. <omitted>
3. Exclusion of competitors
"An act of unfairly excluding competitors" in Article 23(Prohibition of Unfair Trade Practices) Paragraph (1) Item 2 of the previous Monopoly Regulation and Fair Trade Act means the act which falls under the following Subparagraphs.
(Ga) Unfair Bargain
the practices which are likely to exclude competitor of one's own or subsidiary company by continuously providing products or service at a strikingly lower price than the cost necessary for provision without any good reason
(Na) <omitted>
4.~5. <omitted>
【Plaintiff, Appellee】Hyundai Information Technology Corporation (Attorneys Yun Jong-soo & 1 other, Counsel for plaintiff and appellee)
【Defendant, Appellant】 The Fair Trade Commission (Attorneys Song Dong-won and 3 others, Counsel for defendant and appellant)
【Judgment of the Court below】 Seoul High Court Decision 98Nu9181 delivered on 11. Feb. 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. On the first ground for appeal
Article 23 Paragraph (1) of the previous Monopoly Regulation and Fair Trade Act (amended by Law No. 5813 of February 5, 1999) enumerates 'An act of unfairly excluding competitors' as one of the practices which are likely to impede fair trade and Paragraph (2) Item 2 of the same Article provides to decide the type of its practice or criteria through the presidential decree. Thus, [Schedule] Item 3 Subparagraph (Ga) of Article 36 Paragraph (1) of the previous Enforcement Decree of Monopoly Regulation and Fair Trade Act (amended by the Presidential Decree No. 16221 of March 31, 1999) provides unfair bargain as one of the types of practice conforming to Paragraph (1) of Article 23 of the previous Monopoly Regulation and Fair Trade Act and defines it as 'the practices which are likely to exclude competitor of one's own or subsidiary company by continuously supplying products or service at a strikingly lower price than the cost necessary for supply without any good reason or by supplying products or service at a unjust lower price'. A so-called continuous transactional unfair bargain under the former part of Item 3 Subparagraph (Ga)[Schedule] indicates the enterpriser's continuous supply of products or service at an unreasonably low price. If it appears that a practice falls under this category, it is likely to be considered as impeding fair trade 'without any good reason.' However, so-called continuous transactional unfair bargain prescribed under the latter part of [Schedule] Item 3 Subparagraph (Ga) shows that justified supply of products or services at a low price hardly considered as an impediment to fair trade in itself. As a result, supply of products or services at a low price can be an act impeding fair trade only when it is done 'unjustly'. Whether there is unfairness should be decided according to the possibility of impeding fair trade after overall review of various factors in a given situation, such as intention and objective of each unfair bargain, the extent of low price, the possibility of repetition, the characteristics of the products or service in unfair bargain and its market situation, the behavior's position in market, the effect on competitor, etc.
According to the judgment of the court below based on the facts found by the evidence, it was held as follows: the bidding price of the plaintiff who is successful bidder is as low as unable to reflect even the least wages; however, for low-price bidding as above to be unfair bargain regulated in Item 3 Item (Ga)[Schedule] of Paragraph (1) of Article 36 of the previous Enforcement Decree of Monopoly Regulation and Fair Trade Act, the bidding should be performed 'unfairly'; the service business of local information system unification before the competitive bid above has been ordered through a contract ad libitum, usually to National Computerization Agency under the Ministry of Information and Communication or the local college; this was the first case where a competitive bid was made against the private enterpriser; according to 'a local autonomous governmental entity's enforcement plan of promotion of local information', the service business of local information system unification was expected to expand its operation into other geographical areas, Shi/Gun/Gu; thus, the plaintiff and the companies which are not parties in this case are the enterpriser of system unification who participated in the bidding with such a low price falling far short of the expected bidding price tendered in order to accumulate the skill and experience by stepping into the new market called the service business of local information system unification; at that time, the city of Incheon made it a rule to choose a supplier by a system of competitive bidding in every occasion; instead, the plaintiff, a successful bidder, was not endowed the actual priority such as preemptive rights when the city purchase another various equipment and services relating to the services related to this case; moreover, this service is not continuous but one-time job; even though this service was awarded to the plaintiff, still there was no possibility that his competitors would be excluded from the new market in the future. For these reasons, the court below decided that the plaintiff's low-priced bidding did not come under unfair bargain as stipulated in Item 3 Item (Ga)[Schedule] of Paragraph (1) of Article 36 of the previous Enforcement Decree of Monopoly Regulation and Fair Trade Act, so it is not considered unfair practice.
In light of the above records, the fact-finding and judgment of the court below are justified. There was no reversible error in matters of law in determining the criteria of unfairness about unfair bargain in the transaction.
2. On the second ground for appeal
On the assumption that 'the possibility of excluding the competitor' as prescribed in Item 3 Item (Ga) [Schedule] of Paragraph (1) of Article 36 of the previous Enforcement Decree of Monopoly Regulation and Fair Trade Act is not the remote possibility but a forseeable one, the court below ruled that the competitors are unlikely to be excluded from the new market by the plaintiff's bidding process because the plaintiff's competitors was defined as the bidding-participants, the companies which are not a party in the case above by the city of Incheon's definition of the bidding qualification. They were the subsidiaries of the conglomerates that did not have a shortage of funds, scale and manpower as compared with the plaintiff. And their bid also fell far short of the expected bidding price. Moreover, this service is not continuous but a one-time job which will be terminated by submitting a report.
A competitor of Item 3 Subparagraph (Ga)[Schedule] of Article 36 of the previous Enforcement Decree of Monopoly Regulation and Fair Trade Act (amended by the Presidential Decree No. 16221 of March 31, 1999), generally indicates the one who has the practically competitive relation but, in the light that its legislative intent is to prevent the abuse of market-controlling position which is prohibited by the same Act (amended by Law No. 5813 of February 5, 1999), we should see that a potential enterpriser who is expected to enter the market can also be included in the range of the competitor. The fear of excluding the competitor does not make it necessary to actually exclude the competitor. It is enough to acknowledge the potential risk of its happening.
Accordingly, there was an error when the court below decided that the plaintiff's competitors fell within the definition of the bidding-participants and that the fear of excluding the competitor should have some possibility of realization.
However, even though the plaintiff's competitors include the enterpriser who is expected to enter the market in the future, the existence of fear of excluding the competitor should be decided after overall review of various factors in a given situation, such as intention and objective of each unfair bargain, the extent of the low price, the scale of practicer's enterprise and position in the market, and the enterpriser's situation influenced by bargain sale. The object of the plaintiff's bidding is as stated above and there was no evidence which lead to the expectation that the plaintiff would bid with the lowest price again in the new market in the future. For these reasons, it is difficult to consider the plaintiff's one-time bid as risky behavior likely to exclude competitors. The court below's judgment is justified in its conclusion and its error did not affect the conclusion of its judgment. The ground for appeal on this point is not accepted.
3. Therefore, the appeal shall be dismissed. All costs of appeal shall be assessed against the defendant. The decision is delivered with the assent of all Justices who heard the appeal. It is so decided as per Disposition.
Justices Lee Yong-woo (Presiding Justice)
Cho Moo-jeh
Kang Shin-wook
Lee Kang-kook (Justice in charge)
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