A court has nullified both the penalty surcharge in the 200 billion won range and the corrective order that the Korea Fair Trade Commission imposed on Samsung affiliates for allegedly funneling in-house meal volumes to Samsung Welstory. The panel acknowledged that some contract terms favored Samsung Welstory but found that this could not immediately be deemed an unfair support act under the Monopoly Regulation and Fair Trade Act.
The Administrative Division 3 of the Seoul High Court, presided over by Presiding Judge Yun Kang-yeol, on the 23rd ruled for the plaintiffs in a suit filed by four affiliates—Samsung Electronics, Samsung Display, Samsung Electro-Mechanics, and Samsung SDI—and Samsung Welstory seeking to overturn corrective orders by the Korea Fair Trade Commission (FTC). The panel canceled both the corrective order and the penalty surcharge payment order resolved by the commission in Aug. 2021, and ordered each party to bear its own litigation costs.
The issue was whether the four affiliates, including Samsung Electronics, unfairly supported Welstory by awarding all in-house meal volumes to Samsung Welstory through private contracts from 2013 to 2021, while providing favorable terms such as guaranteeing margins on ingredient costs and compensating commission fees.
The Korea Fair Trade Commission (FTC) viewed all meal transactions during this period as unlawful support acts and imposed penalty surcharges totaling about 234.9 billion won: about 101.2 billion won on Samsung Electronics, about 22.8 billion won on Samsung Display, about 10.5 billion won on Samsung Electro-Mechanics, about 4.3 billion won on Samsung SDI, and about 95.9 billion won on Samsung Welstory.
The panel, at the outset, did not accept the FTC's findings. The panel said, "These meal transactions were conducted at a considerable scale, so they cannot be viewed as providing excessive economic benefit, and they cannot be recognized as constituting an unfair support act likely to significantly undermine fair trade." It further found that the FTC's dispositions, premised on the plaintiffs' actions violating the Fair Trade Act, must all be canceled.
The panel also did not accept the claim that the Future Strategy Office intervened, which the FTC had advanced as grounds for its dispositions. The panel said, "Based solely on the evidence submitted by the defendant, there is insufficient proof to conclude that Samsung Electronics and others engaged in meal transactions with Samsung Welstory under the instructions of the Future Strategy Office." It also said, "It is difficult to find that Samsung Electronics and others dealt with Samsung Welstory through private contracts under the instructions of the Samsung Future Strategy Office."
The FTC had cited Samsung Everland's funding needs, the necessity of group-level support, and instructions from the Future Strategy Office as the backdrop for funneling meal contracts, but the court found that such a structure was hard to recognize based on the evidence submitted.
However, the panel found that parts of the meal contract structure favored Samsung Welstory. The panel said, "As for these meal transactions, with respect to Samsung Electronics and Samsung Display, it can be found, as the defendant argues, that there were considerably favorable contract terms." It viewed the limits of the ingredient cost verification structure and the method of reflecting commission fees as elements that could be seen as favorable to Welstory. However, the panel added, "The mere fact that a meal unit price calculation plan was prepared does not establish an intent to support."
The court also differed from the FTC on whether excessive economic benefits were provided. The panel found that the difference in direct profit margins presented by the FTC, the structure of commission payments, and the method of comparing with competitors were insufficient by themselves to conclude there was a disparity between performance and consideration. Given the nature of group meal transactions that operate for large numbers of diners over a long period, the intent was that multiple factors—such as transaction efficiency, accuracy of diner forecasts, and the operator's capabilities—must be considered comprehensively.
The hindrance to fair trade was not recognized either. The panel found that obligations like competitive bidding or volume dispersion, as applied to public institutions, do not immediately apply to private companies' in-house meal transactions. Looking at the actual market, it also found it difficult to conclude that market foreclosure or barriers to new entry occurred based solely on Samsung Welstory's revenue share from non-affiliates or comparisons of profit margins with competitors.
However, the panel said that at business sites where competitive bidding is possible, assigning substantial volumes to an affiliate through private contracts and providing favorable terms—such as guaranteeing ingredient cost margins or compensating commission fees that are unlikely to be reflected in competitive bidding—could raise issues under the Fair Trade Act as unfair support acts or unfair benefit provision acts. The panel concluded that this case did not rise to that level.
Attorney Mun Jeong-il of BAE, KIM & LEE LLC, representing the plaintiffs, said, "We respect the decision, as the panel reviewed the claims and evidence submitted in a comprehensive manner."