The Secretariat of the Korea Fair Trade Commission said on the 20th that seven flour milling companies, including CJ CheilJedang, colluded on flour prices and volumes for six years in violation of the Fair Trade Act. It decided to issue an order to reset prices. It is the first time in 20 years that the Korea Fair Trade Commission (FTC) has issued a price reset order. The companies flagged for collusion this time are CJ CheilJedang, Daeseon Flour Mills, Daehan Flour Mills, Sajo Dongaone, Samyang Corporation, Samhwa Flour Mills, and Hantop. The Secretariat estimated that they posted 5.8 trillion won in sales through collusion. Accordingly, the maximum penalty surcharge the Korea Fair Trade Commission (FTC) can impose is 1.16 trillion won.
◇ Lee: "Collusion is a cancerous presence," prompts rare briefing by the Korea Fair Trade Commission (FTC)
According to the Secretariat, the day before it sent an examination report to the seven flour milling companies, applying violations of Article 40, Paragraph 1, Subparagraph 1 of the Fair Trade Act banning price-fixing collusion and Subparagraph 3 of the same paragraph banning volume-allocation collusion. An examination report is a document in which the Secretariat records the illegality identified during its investigation, as well as measures such as a penalty surcharge; it is similar to a prosecutor's indictment.
Until now, even when the Secretariat sent examination reports to companies, it did not inform the media. That is because an examination report is only an interim result, not a final one. The final result is decided by Commissioners' deliberations at a full Commission meeting held after the report is sent. But on this day, it unusually distributed a press release and even held a briefing for the media.
Yoo Sung-uk, an investigation manager at the Korea Fair Trade Commission (FTC), said, "From a public-interest perspective, when it is deemed necessary to inform the public, we plan to disclose (the sending of examination reports going forward) within a scope that does not infringe on the defense rights of the respondents (the seven flour milling companies)."
It is seen as an extension of President Lee Jae-myung's criticism of collusion as a "cancerous presence" at a senior secretaries' meeting presided over at the Blue House the previous day. The government aims to actively publicize alleged facts about collusion and heighten market vigilance.
◇ Price reset order for the first time in 20 years… penalty surcharge could reach 1.16 trillion
According to the Secretariat, the seven flour milling companies coordinated and raised sales prices while selling flour to major buyers such as ramen and baking companies. They also arbitrarily allocated the quantities to be sold by buyer. The collusion period ran from Nov. 2019 to Oct. 2025. The Secretariat views this collusion as a very serious illegal act, given that they hold an 88% share of the B2B market.
Accordingly, it also decided to issue a price reset order for the first time in 20 years. This is a system under which the government orders product prices to be lowered. In 2006, the Korea Fair Trade Commission (FTC) issued price reset orders to eight flour milling companies that had colluded on flour prices, and the companies identified at the time reportedly cut prices by about 5%.
Penalty surcharges for collusion can be up to 20% of related sales. Considering that related sales in this case amount to 6 trillion won, the seven flour milling companies could face penalty surcharges of up to 1.16 trillion won. However, the Secretariat did not disclose the amount of the penalty surcharge imposed on them. This is scheduled to be made public after the upcoming full Commission meeting concludes.
Meanwhile, the seven flour milling companies can exercise their defense rights, such as submitting written opinions within eight weeks of receiving the examination report. The Korea Fair Trade Commission (FTC) plans to convene a full Commission meeting as swiftly as possible and issue a final decision.