Fair Trade Commission: "Information exchange on prices and production volumes that restrict competition is illegal"

Administrative Notice on the Proposal for Establishment and Revision of 8 Administrative Rules in the Cartel Sector

[Sejong=Asia Economy Reporter Joo Sang-don] The Korea Fair Trade Commission (KFTC) has decided to regulate acts of collusion that restrict market competition by agreeing on the exchange of information such as prices among competitors as cartel behavior.

On the 2nd, the KFTC announced that it will publicly notify eight administrative rules related to cartel matters, including new and revised rules, from the 3rd to the 23rd.

A KFTC official explained, "The draft guidelines for reviewing unfair concerted acts involving information exchange (Information Exchange Collusion Review Guidelines) specify that only information exchanges that restrict competition are illegal and provide examples of illegal information exchanges. The seven other administrative rule amendments, including the concerted act review standards, reflect legal amendments such as the integration of reasons for approval of concerted acts and include improvements to some shortcomings identified during the operation of the system."

Specifically, the main contents of the Information Exchange Collusion Review Guidelines include ▲the concept of information exchange, i.e., the act of giving and receiving information ▲matters related to illegal agreements on information exchange ▲matters related to the presumption of agreement through information exchange.

First, information exchange is defined as an act where a business operator 'notifies' a competing business operator directly or indirectly of information such as prices or production volumes. This includes direct notifications via oral communication, mail, telephone, as well as notifications through intermediaries such as business associations. However, acts of disclosure or publication in places accessible to anyone without restriction are not considered information exchange and are excluded from the scope of regulation.

The illegality of information exchange is recognized when ▲there is an agreement among competitors on the exchange of competitively sensitive information ▲the information exchange results in unfair restriction of market competition ▲there is no efficiency gain sufficient to offset the competition-restricting effect. Not all information exchange acts are prohibited; only those where prices, production volumes, costs, shipment, inventory, sales volumes, transaction conditions, or payment terms are exchanged by agreement among competitors in a way that restricts market competition are illegal.

Whether competition is unfairly restricted will be judged comprehensively by considering ▲market conditions ▲market structure and product characteristics ▲market share ▲nature of the information ▲form of information exchange ▲purpose of the information exchange. For example, if price increases and market share stabilization occur after information exchange, it is highly likely that the information exchange restricted competition. However, if the combined market share is 20% or less, competition is considered not restricted.

The KFTC cited as conditions for presuming agreement through information exchange cases where competitors' competitive variables (such as prices) appear identical and where there is an exchange of information necessary to create such apparent identity. Even if prices are not exactly the same, differences that do not affect consumer choice can be recognized as 'apparent identity.' Even if agreement is presumed, a business operator can deny it at the litigation stage by proving that there was no apparent identity, no necessary information exchange, or that the apparent identity was not due to an agreement.

Additionally, in examples of collusion on transaction conditions, the KFTC revised the list to include 'sales incentives, shipment incentives, consignment fees, provision of free goods or services, supply methods of goods or services to specific types of consumers, and transportation conditions,' excluding 'transaction location' and 'transaction method.'

The KFTC plans to finalize and implement the amendments by December 30 this year after collecting opinions from stakeholders and related ministries through the public notice process and passing resolutions at the plenary meeting.

This content was produced with the assistance of AI translation services.