Korean Price-Fixing Law: Defining the Relevant Market in Korea Antitrust Law

The Seoul High Court (2009 NU 1930, May 19, 2010) has overruled a decision of the Korean Fair Trade Commission (KFTC) in a case concerning price-fixing by luxury car importers. The KFTC has appealed the this pivotal price-fixing case. We shall update the reader.

The High Court ruled that a price-fixing arrangement (restriction on discounts from MSRP) between Lexus car dealers was not an “unfair collective act” under Monopoly Regulation and Fair Trade Act Art. 19 (1) thus overruling the decision of the KFTC that imposed a fine and ordered the dealers not to engage in the price-fixing arrangement. The KFTC has also imposed a fine on other luxury car importers.

The KFTC opined that the relevant market was the market for the particular car and not the entire car or luxury car market. Thus, the Commission ruled that the act restrained trade absolutely within the relevant particular car luxury market (Lexus market) and thus restrained 100% of trade within the market.

The Seoul High Court, in contrast, defined the relevant market as the entire market for imported automobiles and luxury domestic cars. Thus, the BMW car market accounted for “much less than 15%” of the relevant market and thus was not a significant restraint on trade and thus didn’t reduce competition in the relevant market.

I would be curious to hear what others feel about this case.

It seems like the Seoul High Court will now not rule per se that a price-fixing relationship is an unfair collect act (unfair restraint on trade) and will require a finding by the KFTC that the arrangement has a substantial effect on competition. The Seoul High Court will also likely define the markets very broadly.

As we all know in Korea, the courts are far less predictable than in Europe and the states this holding may be not followed in preceding cases, even by the same court.

Also, it is curious that the decision by the Supreme Court (2003 Du 9252, Aug. 19, 2005) seems to have been ignored by the Seoul High Court. The Supreme Court in the case opined that price-fixing is per se and unfair collective act “absent special circumstances.” What is the special circumstance in this case?

I am very interested to see what the Supreme Court does and if the Court will pick the obvious market middle-ground (why define all imported cars in the same category as luxury cars), uphold the decision or stand by its previous holding etc. I will update the reader HERE on the outcome of the Supreme Court case.

The Supreme Court case is 2010 DU 11757 and no hearing date, as of October 6, 2010, is scheduled. This would be great one for oral arguments. Expect no update soon.

Also of interest may be: