Supreme Court Rules Fair Trade Commission's Sanction on Citibank and JP Morgan for Bid Rigging Is Lawful

The Supreme Court has ruled that the Fair Trade Commission's sanction against Korea Citibank and JP Morgan Chase for collusion in a currency swap contract bidding was lawful.

According to the Fair Trade Commission on the 13th, the Supreme Court overturned the lower court's ruling, which had favored the plaintiffs in the fines cancellation lawsuits filed by Citibank and JP Morgan on the 31st of last month, and remanded the case to the Seoul High Court.

Earlier, in March 2020, the Fair Trade Commission imposed a total fine of 1.321 billion KRW and corrective orders on Citibank, Hongkong and Shanghai Banking Corporation, Credit Agricole, and JP Morgan Chase Bank for colluding in four financial contract bids (currency swap contracts converting foreign currency debt to Korean won debt) conducted by Korea Hydro & Nuclear Power and Korea Expressway Corporation.

This was because it was discovered that certain banks acted as shills to ensure a specific bank won the bid or agreed in advance not to participate in the bidding. The lower court ruled that the currency swap bids in question did not have the substance of competitive bidding, so collusion was not established. It reasoned that each contracting agency had verbally agreed with a specific bank before the bid, which could be seen as effectively concluding a private contract.

However, the Supreme Court judged that even if there was a verbal agreement, the bidding could still be considered to have existed. It distinguished the case from situations where no bidding was conducted at all and only formal bidding documents were fabricated to make it appear as if bidding had occurred, and found that the structure and form of the conduct were substantially similar to cases where bidding was actually conducted.

The Supreme Court also pointed out that private contracts between the contracting party and the winning bank are binding only between those parties and do not affect the bidding process that follows. It noted that other banks could have participated in the bidding expecting valid competition or that banks involved in collusion might have broken the agreement and submitted better bids.

In light of the legislative purpose of the Fair Trade Act regulating unfair joint conduct, the Supreme Court held that such forms of bidding need to be regulated and that competition throughout the bidding process must be protected.

The Fair Trade Commission stated, "We will actively respond to the retrial and remand proceedings to ensure that the Fair Trade Commission's disposition is upheld."

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