Asiana 'In-flight Meal Crisis' Lawsuit, Fair Trade Commission Wins... "Illegal Circumvention of Unfair Internal Transactions"

The Fair Trade Commission won a lawsuit challenging a fine of over 8.1 billion won imposed on Asiana Airlines, which began with the so-called ‘in-flight meal crisis’ incident.

According to the Fair Trade Commission on the 7th, the Administrative Division 6-1 of the Seoul High Court (Presiding Judge Hwang Ui-dong) dismissed Asiana Airlines’ lawsuit seeking cancellation of the ‘corrective order and fine payment order.’ Fair trade lawsuits follow a two-tier system where the Seoul High Court serves as the court of first instance and the Supreme Court as the appellate court.

Since the Kumho Asiana Group experienced a management crisis starting in 2010, it established Kumho Express in 2015 to acquire affiliates. To raise funds for acquiring affiliates, the group transferred Asiana Airlines’ exclusive 30-year in-flight meal supply rights to Gate Gourmet Korea (GGK) on the condition that Kumho Express would purchase bonds with warrants (BW). GGK spent 160 billion won to acquire the BW. Subsequently, as there was only one supplier for in-flight meals, the so-called ‘crisis’ occurred in 2018 when in-flight meals were not supplied on Asiana Airlines.

In response, in November 2020, the Fair Trade Commission imposed a corrective order and a fine of 8.147 billion won on Asiana Airlines for violating the ‘provision of unfair benefits and unfair support to related parties’ by supporting Kumho Express under favorable conditions. The following month, Asiana Airlines filed a lawsuit at the Seoul High Court seeking cancellation of the Fair Trade Commission’s disposition.

The structure of the exclusive in-flight meal supply rights and BW acquisition deal among Asiana Airlines, Kumho Express, and Gate Group

The court judged that without Asiana Airlines’ exclusive in-flight meal supply contract, the BW acquisition would have been impossible. The court explained, “If this in-flight meal contract had not existed, the Gate Group would have had no reason to proceed with Kumho Express’s BW acquisition contract,” and “It is fully possible to recognize the intention to support Kumho Express and former Kumho Asiana Group Chairman Park Sam-gu by Asiana Airlines.”

Asiana Airlines argued that the contract was invalid under private law because it was made through abuse and breach of trust by Chairman Park Sam-gu at the time, and that the Fair Trade Commission could not impose sanctions, but this was not accepted. The court ruled that even if the contract were invalid, the Fair Trade Commission can determine whether unfair support and unfair benefit provision acts have occurred according to the law and impose sanctions. Otherwise, it would be impossible to sanction the support entities for the private gain activities of the controlling family.

The Fair Trade Commission stated, “This ruling is significant in clearly establishing that unfair internal transactions indirectly conducted through a third party, rather than direct internal transactions within a corporate group aimed at maintaining and strengthening the controlling family’s power, are also illegal.”

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