Court Rules "Samsung Affiliates' In-House Catering Deals Not Unfair Support"... Cancels FTC Fine of KRW 234.9 Billion

All Five Samsung Affiliates Win in Court
"Insufficient Evidence," Says the Court

The court has overturned the Fair Trade Commission's (FTC) ruling that Samsung Group affiliates, including Samsung Electronics, unfairly supported Samsung Welstory by outsourcing in-house catering services to it under favorable terms.

Seoul Southern District Court, Seocho-gu, Seoul. Photo by Yonhap News

On April 23, the Seoul High Court's Administrative Division 3 (Presiding Judge Yoon Kangyeol) ruled entirely in favor of the plaintiffs—Samsung Electronics, Samsung Display, Samsung Electro-Mechanics, Samsung SDI, and Samsung Welstory—in their lawsuit seeking to nullify the FTC's corrective order and fine. However, despite the plaintiffs’ victory, each party was ordered to bear its own litigation costs.

The court stated, "We examined each requirement for determining unfair support—such as the intention to support, the significance of the transaction scale, whether excessive economic benefits were provided, and the impact on fair trade. However, the evidence submitted by the FTC was insufficient to conclusively prove these elements."

Previously, in August 2021, the FTC determined that four companies, including Samsung Electronics, had unfairly provided excessive economic benefits to their affiliate Samsung Welstory by awarding in-house catering contracts to it via private negotiations from April 2013 to June 2021. The FTC found that the companies guaranteed margins on ingredient costs, paid consignment fees amounting to 15% of labor costs, and automatically reflected price and wage increases—thus offering highly favorable terms. As a result, the FTC imposed a total fine of KRW 234.9 billion: KRW 101.2 billion on Samsung Electronics, KRW 22.8 billion on Samsung Display, KRW 10.5 billion on Samsung Electro-Mechanics, KRW 4.3 billion on Samsung SDI, and KRW 95.9 billion on Samsung Welstory, while also ordering them to cease the relevant conduct. Samsung Welstory filed an administrative lawsuit in 2021 to challenge the penalty.

The court’s judgment differed from the FTC’s findings. Regarding the intention to support, the panel acknowledged that the "Everland Operations Meeting" materials cited by the FTC as evidence of intervention by Samsung’s Future Strategy Office contained a significant amount of routine business content, such as improving catering quality and external competitiveness, which were unrelated to preserving Samsung Welstory's profits. However, the court pointed out that in practice, the proposed improvements to catering contract terms—such as labor costs and consignment fees—were not actually applied, as these fees remained frozen during contract negotiations. Therefore, the mere existence of improvement plans was insufficient to establish an intention to support.

On the scale of the transactions, the court noted that the institutional catering market is structured such that service continuity and switching costs when changing providers are significant factors. Since private contracting is also common practice among other conglomerates in the catering sector, the court found that the absolute size of the financial indicators alone did not satisfy the requirement of significant transaction scale.

Regarding the provision of excessive economic benefits, the court rejected the FTC’s method of directly comparing profit rates. The court explained that the non-affiliate business sites used as benchmarks by the FTC were not equivalent in terms of meal volume or transaction conditions to those in the case at hand. Furthermore, the consignment fee was a pre-determined component of the operating cost within the meal price—not a profit—so it could not be considered as creating a difference between what was provided and what was received in return.

In assessing unfairness, the court cited the fact that Samsung Welstory’s share of institutional catering market revenue actually decreased in 2019 compared to 2013, and that its market share based on sales from non-affiliates also declined. The court stated, "There is no legal obligation for Samsung Electronics and others to conduct competitive bidding or to allocate meal volumes to small and medium-sized enterprises," and concluded that there was insufficient evidence to demonstrate that the transactions in question undermined fair market order in the institutional catering industry.

Meanwhile, separate from the results of this administrative lawsuit, legal battles over criminal liability are ongoing. Following an FTC complaint, former head of the Future Strategy Office Choi Jisung, the Samsung Welstory corporation, and former executive Park were indicted in November 2022 on charges of leading the unfair support (violation of the Fair Trade Act). The first trial is currently underway at the Seoul Central District Court. Former executive Park is also accused of instructing employees to destroy evidence by degaussing (magnetic deletion) hard drives during the FTC’s on-site investigation in 2018. Choi and others maintain that they are entirely innocent of the charges.

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