OECD kpcdb

1. Scope

 

Abusive conduct by a dominant business entity is prohibited under Article 3-2(1) of the MRFTA. The MRFTA does not provide for a general definition for abusive conduct. Instead, the MRFTA lists five different types of conduct which includes exclusionary and exploitative conduct. Prohibited conduct includes the following:

 

a)  Unreasonably determining, maintaining, or changing the price of goods or services

b)  Unreasonably controlling the sales of goods or the supply of services

c)  Unreasonably hindering the business activity of other business entity

d)  Unreasonably impeding new competitors’ market entry

e)  Unfairly excluding competitors or doing considerable harm to the interests of consumers.

 

Paragraphs (a) and (b), and the latter part of paragraph (e) constitute exploitative practices. The categories or standards for abuse are specified by the presidential decree and Guidelines for the abuse of market dominant position.

 

Paragraph (c) and (d), and the former part of paragraph (e) constitute exclusionary practices. The categories or standards for abuse are specified by the presidential decree and Guidelines for the abuse of market dominant position.

2. Assessment

Article 2 of the MRFTA defines market-dominant business entity as one in a position to determine, maintain, or change, alone or jointly with other business entities, the price, quantity or quality of goods or services, or other trading conditions in a certain line of trade.

 

Under Article 4 (Presumption of Market Dominant Business entity) of the MRFTA, a business entity that has one of the following market shares in a certain line of trade is presumed a market-dominant business entity (except an business entity whose annual sales turnover or annual purchases amount in a certain line of trade is less than KRW 4 billion):

 

a)  The market share of one business entity is 50/100 or more; or

b)  The combined market share of not less than three business entities is 75/100 or more. (Those whose market share is less than 10/100 shall be excluded.)

 

In determining dominance, non-market-share factors are also considered: the existence of barriers to market entry; the degree of market barrier; relative scale of competing businesses; possibility of competitors working jointly; the existence of similar products and adjacent markets; and market-freezing ability and resources.

 

The Guidelines for the Abuse of Market Dominant Position sets out the standards for examining whether a conduct of a market dominant business entity constitutes an abuse of market dominant position.

 

As an example, in the assessment of whether an exclusive dealing constitutes an abuse of market dominance should take various factors into consideration: the intent or purpose and conduct of the dealing, market share of the dominant firm, how much competitors’ entry into the market or market expansion opportunity was foreclosed, whether the act has raised costs, duration of the transaction, whether the act has changed the price and output in the relevant market, whether there exist similar products and adjacent market, whether innovation and diversity are undermined, amongst others. However, as far as proving the intent or purpose to limit competition is concerned, the Supreme Court of Korea has ruled that exclusive dealing is an act that conditions the transaction on not trading with competitors, so the act has in its nature the intent to limit competition. Therefore the Supreme Court relieves the level of proving the anti-competitive intent or purpose when applying these provisions to exclusive dealing.

3. Remedies and sanctions

The KFTC has the power to issue corrective measures and surcharges which are administrative in nature. Article 5 of the MRFTA sets forth that where there exists any violation of the provisions of Article 3-2, the KFTC may order the market dominating business entity to reduce the price, to cease the act of violation, to publish the fact that the business entity is ordered to make corrections thereof, and to take other measures necessary for correction.

 

Article 6 stipulates that in cases of abusive acts by a market-dominating business entity, the KFTC may impose upon such an business entity a surcharge not exceeding the amount equivalent to 3/100 of the turnover determined by the presidential decree.  However, where it is difficult to compute the turnover, up to KRW1 billion may be imposed as surcharges.

 

Regarding criminal sanctions, article 66 (Penalty Provisions) (1) sets forth that any person who violates Article 3-2 shall be punished by imprisonment for up to three years or by a fine not exceeding KRW 200 million.

 

Since its establishment in 1981 to 31 December 2016, the KFTC imposed a total of 93 measures such as surcharges, and corrective orders against abuse of dominance cases.

 

 

* This information is based on Competition Law in Asia-Pacific: A Guide to Selected Jurisdictions (2018).