SOUTH KOREA Trends and Developments Contributed by: John H. Choi, Changhun Lee, Hyunah Kim and Jae-Hyuk Choi, Shin & Kim
remedial orders and surcharges on the Korea Duck Association for its active involvement in determining the production volume restrictions of its member companies. The KFTC reviewed whether the production vol - ume restriction agreement could be exempt from the application of the MRFTA on the grounds that it aligned the government’s supply and demand control policy. However, the KFTC concluded that the exemption did not apply, considering that (i) the Ministry of Agriculture, Food and Rural Affairs (MAFRA) had never issued orders under the relevant laws instructing the companies to adjust production or regulate shipments of fresh duck meat, and (ii) the companies had already agreed to restrict production volumes among themselves prior to MAFRA officials deciding on production reductions in meetings. Based on these findings, the KFTC held that the con - duct did not qualify for exemption from MRFTA application. Seoul High Court ruling cancelling the KFTC’s decision In the appeal filed by Company A, one of the companies implicated in the duck meat cartel case, the Seoul High Court’s Administrative Divi - sion 3 ( “Division 3” ) cancelled the KFTC’s deci - sion (Seoul High Court, Sept. 26, 2024, Case No 2022Nu61146). While Division 3 acknowledged that Company A had entered into an agreement to restrict the production volume of fresh duck meat, it ruled that, considering the particular characteristics of the agricultural and livestock sector, the agreement could not be viewed as unfairly restricting competition. Division 3 also found no evidence that Company A had partici - pated in an agreement to raise prices, and held the KFTC’s decision to be unlawful.
First, with respect to the production volume restriction agreement in this case (the “Produc- tion Volume Restriction Agreement” ), Division 3 acknowledged that Company A had indeed entered into such an agreement. Division 3 then examined whether the Production Volume Restriction Agreement could qualify as “legiti- mate conduct under other laws” and was thus exempt from MRFTA application pursuant to Article 58 of the former MRFTA. Article 58 exempts from MRFTA application those legitimate acts conducted by businesses or business associations under other laws or regulations, that is, the conduct that is (i) spe - cifically recognised as an exception to free com - petition by another law; (ii) permitted under that law; and (iii) limited to the minimum necessary extent. Division 3 concluded that Company A’s Production Volume Restriction Agreement did not constitute legitimate conduct under other laws and that the MRFTA did apply to the case, and its reasoning was as follows. • MAFRA was required to follow certain proce - dures under the relevant legislation to adjust production or regulate shipments of the rel - evant livestock, but in this case, MAFRA did not follow such procedures. • MAFRA only provided general administrative guidance without any specific legal basis, and the Production Volume Restriction Agree - ment was entered into in accordance with this administrative guidance. Therefore, the agree - ment did not fall under a legally recognised exception to free competition. Nevertheless, Division 3 held that Company A’s Production Volume Restriction Agreement did not unfairly restrict competition and there - fore did not constitute an illegal cartel. Division 3 took the view that the standard for assess-
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