In a case alleging that nine meat processors colluded on the price of pork supplied to E-MART, the Korea Fair Trade Commission (FTC) and prosecutors assessed the size of the collusion at vastly different levels, with a 63-fold gap. The Korea Fair Trade Commission assessed the collusion at 19 billion won, while prosecutors put it at 1.2 trillion won.
It is considered unusual for the Korea Fair Trade Commission (FTC) and prosecutors to show such a large difference over the size of collusion. As key figures in the case have been indicted on charges of violating the Fair Trade Act, the size of the collusion is expected to be finalized by a court ruling.
In recent collusion cases, the Korea Fair Trade Commission (FTC) and prosecutors reached almost the same estimates for the size of collusion. Early this year, for the sugar collusion involving CJ CheilJedang, Samyang Corporation, and TS Corporation, the Korea Fair Trade Commission estimated 3.2884 trillion won and prosecutors estimated 3.2715 trillion won. For the flour collusion involving CJ CheilJedang, Samyang Corporation, Daehan Flour Mills, Sajo Dongaone, Daesun Flour Mills, Samhwa Flour Mills, and Hantop, the Korea Fair Trade Commission estimated 6 trillion won and prosecutors estimated 5.9913 trillion won.
So why is there a 63-fold difference between the Korea Fair Trade Commission (FTC) and prosecutors in estimating the size of the pork collusion?
First, the Korea Fair Trade Commission (FTC) estimated the size of collusion based on the "collusive amount," while prosecutors used the "purchase amount." The Korea Fair Trade Commission included only bids in which meat processors agreed on prices and winners between July 2021 and Oct. 2023 in the collusion amount. It relied on Telegram messages exchanged by company officials. Prosecutors, by contrast, viewed the entire 1.2 trillion won in pork purchases that E-MART made from meat processors through bidding during the same period as the size of the collusion.
The Korea Fair Trade Commission (FTC) and prosecutors also differed on "information-exchange collusion." Information-exchange collusion refers to exchanging key information that can restrict competition, such as prices, volumes, and transaction terms. As a new type of collusion, it can be sanctioned even if there is no price or volume agreement among companies.
The collusion size released by the Korea Fair Trade Commission (FTC) excludes information-exchange collusion. The commission plans to impose additional sanctions covering information exchange in subsequent procedures, but is said to be focusing only on conduct after Dec. 2021. It based this on the point from which information-exchange collusion began to be sanctioned due to a Fair Trade Act amendment (Dec. 2021).
Prosecutors, on the other hand, included information-exchange collusion prior to Dec. 2021 in the collusion size. They argued that the weekly exchange of pork quote price information among meat processors during this period should also be deemed collusive conduct. If so, the collusion period determined by prosecutors becomes about four years longer than the period identified by the Korea Fair Trade Commission (FTC).
In this case, the Korea Fair Trade Commission (FTC) imposed a penalty surcharge of 3.165 billion won on the nine meat processors. Prosecutors indicted six companies that actively participated in the collusion and 12 executives and employees on charges of violating the Fair Trade Act.
A legal professional specializing in fair trade said, "This is an interesting case in which the Korea Fair Trade Commission (FTC) and prosecutors' estimates of the collusion size differ by as much as 63 times," adding, "In particular, attention is on how the court will assess information-exchange collusion."