They Colluded to Earn 5.8 Trillion Won... "Will Noodle Prices Made from That Flour Also Fall?"

"Flour Cartel" Millers Face Calls for Price Redetermination
KFTC Examination Report Includes Opinion for "Price Redetermination Order"
Some Milling and Sugar Companies Voluntarily "Cut Prices"
Unclear Whether Final Consumer Food Prices Will Fall

The Korea Fair Trade Commission (KFTC) has decided at its plenary session to deliberate on allegations that seven flour milling companies, including CJ CheilJedang and Daehan Flour Mills, repeatedly colluded to fix flour sales prices and allocate sales volumes in business-to-business (B2B) transactions from November 2019 to October last year, drawing attention to whether an order for price readjustment will be issued.

According to the food industry on the 21st, the combined B2B flour market share of the seven milling companies — Daesun Flour Mills, Daehan Flour Mills, Sajo Dongawon, Samyang Corporation, Samhwa Flour Mills, CJ CheilJedang, and Hantop — reaches 88%. The KFTC estimates that the related sales affected by their collusive conduct amount to approximately 5.8 trillion won.

The KFTC’s assessment report includes the view that their collusion constitutes a serious violation of the law, warranting a corrective order and the imposition of fines, as well as an opinion calling for a “price readjustment order” instructing each milling company to voluntarily reset its prices.

Previously, in 2006, the KFTC also imposed a total of 43.5 billion won in fines on eight milling companies and issued a corrective order that included a price readjustment order, on the grounds that they violated the Fair Trade Act by jointly restricting flour production and sales volumes or colluding to raise sales prices. Some companies filed lawsuits challenging the fines and corrective orders but lost.

Flour display at a large supermarket in Seoul. Yonhap News

Recently, milling companies have preemptively lowered the prices of sugar and flour. CJ CheilJedang first cut the prices of sugar and flour for foodservice use by an average of 6% and 4%, respectively, and then reduced the factory prices of all consumer sugar and flour products. The price cuts apply to 15 consumer sugar items, including Baeksul White Sugar and Baeksul Brown Sugar, with a maximum reduction of 6% (an average of 5%). Sixteen consumer flour products, including Baeksul Glutinous Flour and first-grade soft, medium, and strong flour, also saw price reductions of up to 6% (an average of 5.5%).

Daehan Flour Mills also lowered the factory prices of some products by an average of 4.6% starting this month. The price cuts mainly apply to 20 kg bulk products supplied to restaurant businesses, such as Gompyogogeubjemyeonyong (Australian wheat), Gom (first-grade medium flour), and Elephant (first-grade strong flour), as well as 3 kg, 2.5 kg, and 1 kg small-pack products supplied to retail distributors.

Yoo Seongwook, Director of Investigation Management at the Korea Fair Trade Commission, explained the contents of the review report on unfair concerted conduct by seven flour manufacturers and sellers at the Korea Fair Trade Commission press room in Government Complex Sejong on the 20th. Yonhap News

If the KFTC issues a price readjustment order, attention will also focus on whether food companies that previously raised prices due to higher raw material costs will lower consumer prices for products such as instant noodles. However, since product price increases are driven not only by raw material costs but also by various other expenses such as logistics and labor costs, it remains uncertain whether this will actually lead to lower final consumer prices.

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