[Invest&Law] Samsung Welstory Fine Lawsuit Over 'In-House Catering Allocation' Verdict Due Next Week

First Ruling in Five Years on Samsung Welstory's Appeal Against KFTC Sanctions
Group Fined Total of 235 Billion Won; 'Unfair Support' at Center of Dispute

The first court ruling in the administrative lawsuit filed by Samsung Welstory against the Korea Fair Trade Commission (KFTC) over the 'Samsung Group in-house catering business allocation' sanctions is expected next week. This ruling comes nearly five years after the KFTC's decision, and the central issue is whether transactions between affiliates constitute 'unfair support.'

According to legal sources on April 15, the Administrative Division 3 of the Seoul High Court (Presiding Judge Yoon Kangyeol) is scheduled to deliver its verdict on April 23 in the lawsuit filed by Samsung Welstory seeking to overturn the KFTC's corrective order and related measures.

KFTC: "Affiliated companies guaranteed profits by allocating business exclusively"

Previously, in June 2021, the KFTC found that under the direction of Samsung's Future Strategy Office, four companies—Samsung Electronics, Samsung Display, Samsung Electro-Mechanics, and Samsung SDI—ceased competitive bidding for in-house catering from 2013 and allocated all business volume to Samsung Welstory.

The KFTC determined that there was unfair group-level support to ensure Samsung Welstory could secure high profits, and imposed a total fine of 234.9 billion won on the four affiliates and Samsung Welstory. Of this amount, Samsung Welstory was fined approximately 95.9 billion won. Samsung Welstory, contesting the KFTC's decision, filed an administrative lawsuit in September 2021.

During the administrative trial, the KFTC argued that there was group-level support to allow Samsung Welstory to maintain stable and high profits through measures such as guaranteeing margins on food ingredient costs, providing additional payments for labor through commission fees, and automatically reflecting increases in prices and wages. The KFTC also claimed that the scale of these transactions was large enough to affect the market.

Samsung Welstory: "Result of efficiency, not unfair support"

On the other hand, Samsung Welstory countered that "no separate margin was guaranteed," emphasizing that "the related profits resulted from distribution efficiency." After more than ten hearings, the court completed all oral arguments in September last year. The verdict, initially scheduled for the end of last year, was postponed as the court rescheduled four times. Appeals against KFTC sanctions are conducted through a two-tier system (Seoul High Court and Supreme Court).

Seoul High Court, Seocho-gu, Seoul. The Asia Business Daily DB

Separately from the administrative lawsuit, there is also ongoing legal dispute over criminal liability. Following a KFTC complaint, Choi Jisung, former head of the Future Strategy Office, Samsung Welstory as a corporate entity, and former executive Park were indicted in November 2022 on charges of leading the unfair support (violation of the Monopoly Regulation and Fair Trade Act). Additionally, former executive Park is accused of instructing employees to degauss (erase data with a magnetic field) hard drives during the KFTC's on-site investigation in 2018, thereby destroying evidence.

The first-instance criminal trial for these individuals is currently underway at the Seoul Central District Court. Choi and the other defendants have maintained that they deny all charges in the criminal proceedings.

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