SOUTH KOREA Trends and Developments Contributed by: John H. Choi, Changhun Lee, Hyunah Kim and Jae-Hyuk Choi, Shin & Kim
ing the unfairness of joint conduct in the agri - cultural and livestock sector should differ from general market contexts. Citing the importance of supply-demand balance and price stability in agricultural products, constitutional provisions related to the agricultural sector, and foreign cases recognising exceptions to competition law in agriculture, Division 3 stated that where joint conduct by producers in the agricultural and livestock sector aims to balance supply and demand or stabilise prices for the sustainability of the industry – and does not lead to undue price increases that hinder fair trade – such con - duct does not substantially violate the legislative intent of the MRFTA and cannot be considered as unfairly restricting competition. Division 3 held that, in this case, the Production Volume Restriction Agreement fell into an excep - tional category that did not substantially violate the purpose of the MRFTA, where, considering its overall effect, it ultimately protected consum - ers and contributed to balanced development of the national economy, and therefore could not be regarded as unfairly restricting competition. Division 3 cited the following grounds. • The Korea Duck Association qualifies as an “organization founded on the spirit of self- help among farmers” protected by Article 123 (5) of the Korean Constitution. There - fore, production volume restriction agree - ments entered into through the Korea Duck Association must be reviewed in light of this constitutional intent to protect the agricultural and livestock sector and cannot be deemed unfairly restrictive merely because they limit production. • The objective of the Production Volume Restriction Agreement was to prevent market prices of fresh duck meat from falling below
production costs, rather than to unfairly raise prices using market dominance. • Fresh duck meat is difficult to control in terms of supply, and in cases of oversupply, only large-scale businesses can survive in the market, leading to market concentration. Furthermore, reliance on imported agricultural products may cause domestic food supply to be affected by external factors. Therefore, production volume restriction agreements to prevent prices from falling below production costs may ultimately benefit consumers and cannot be viewed as having solely anti-com - petitive effects. • MAFRA recognised the need to restrict the production volume of duck meat, supported companies’ voluntary efforts to adjust supply, and also formed a consultative group with producers to review production reduction plans and monitor the outcomes. Accordingly, Division 3 concluded that the Production Volume Restriction Agreement did not result in an unfair increase in duck meat prices. In addition, with regard to the price increase agreement (the “Price Increase Agreement” ), Division 3 found no evidence that Company A participated. The court noted that Company A did not attend meetings where other companies discussed price increases and that the meet - ings attended by Company A did not involve any price increase discussions. Based on this, Division 3 concluded that there was insufficient evidence that Company A had participated in the Price Increase Agreement. Seoul High Court ruling upholding the KFTC’s decision In contrast to the ruling issued by Division 3, in the appeal filed by Company B – one of the companies implicated in the same cartel – the Seoul High Court’s Administrative Division 6-2
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