The Korea Confectionery Association, which has 4,000 member companies nationwide, will pursue a damages suit against sugar and flour companies accused of price-fixing. The association said the burden of skyrocketing materials and supplies costs due to collusion was passed on to small mom-and-pop bakeries and confectionery shops. If a collective response at the association level materializes, observers say it could lead to additional lawsuits by individual confectionery businesses and small food companies.
According to legal sources, the Korea Confectionery Association is reviewing a class action, including claims for damages, against related corporations accused of colluding on sugar and flour prices. The association plans to gather members' opinions and then begin procedures to select a law firm to represent the case.
Founded in 1963, the Korea Confectionery Association is a group representing the domestic confectionery and bakery industry. It has about 4,000 members nationwide. Most are small businesses such as neighborhood bakeries and independent confectionery shops. The reason the association began reviewing a collective response is that member small businesses were hit hard by a sharp rise in materials and supplies prices. Prosecutors believe flour prices jumped as much as 42.4% and sugar prices as much as 66.7% during the period of the offense due to collusion by sugar and flour companies.
An association official said, "Small businesses have suffered considerable damage due to collusion by sugar and flour companies," and added, "Although nothing has been finalized, we are reviewing legal responses, including lawsuits, to help them."
Prosecutors said the scale of the sugar and flour price-fixing totals 9.2628 trillion won. The Seoul Central District Prosecutors' Office Fair Trade Investigation Department (Director General Na Hee-seok) in February indicted Daehan Flour Mills, Sajo Dongaone, Samyang Corporation and other millers on charges of colluding on flour prices, and in Nov. last year indicted CJ CheilJedang, Samyang Corporation, TS Corporation and others on charges of colluding on sugar prices.
In particular, the sugar price-fixing case is set for a first-trial verdict at 10 a.m. on the 23rd. Prosecutors have sought prison terms for Kim Sang-ik, former head of food for Korea at CJ CheilJedang, and Choi Nak-hyun, former CEO of Samyang Corporation, among others.
Legal circles said that if an association-level suit gets underway, additional lawsuits by individual small businesses and small and midsize food companies could follow. Related litigation has in fact already begun. On the 21st, the head of a well-known regional confectionery company, identified as A, filed a complaint with the Seoul Central District Court seeking 20 million won in damages from CJ CheilJedang, Samyang Corporation and TS Corporation. The gist is that the corporations' collusion forced the company to buy materials and supplies at high prices, causing losses.
A legal source said, "The Korea Fair Trade Commission has already imposed sanctions, and in the sugar price-fixing case, the corporations have acknowledged the facts of the indictment in court," adding, "If a damages suit is filed, the plaintiffs are likely to argue from a favorable position."