CONTENTS
- 1. Monopoly Regulation and Fair Trade Act | Case Overview
- - The Client Company's Case
- 2. Monopoly Regulation and Fair Trade Act | Legal Issues
- - Progress of the Case
- 3. Monopoly Regulation and Fair Trade Act | Daeryun's Assistance
- - Case Result
- 4. Monopoly Regulation and Fair Trade Act | Implications
- - The Need to Review Whether the Monopoly Regulation and Fair Trade Act Has Been Violated
1. Monopoly Regulation and Fair Trade Act | Case Overview
While the Monopoly Regulation and Fair Trade Act establishes free transactions between businesses as a guiding principle, it also strictly restricts unfair trade practices that exploit a superior bargaining position.
This case concerns a subcontractor that had been driven to the brink of closure by a large corporation's unilateral reduction of transactions and that obtained substantial compensation through a response grounded in the Monopoly Regulation and Fair Trade Act.
The Client Company's Case
The client, Company A, was a small-scale business in the packaging and logistics field and a subcontractor that had maintained transactions with Company B, a large corporation in the domestic distribution industry, for more than 20 years.
Company A's dependence on these transactions was very high, to the extent that most of its revenue was generated through Company B.
However, Company B, without any reasonable justification, began to progressively reduce its order volume from Company A and, over the course of several years, cut it to less than half of the previous volume.
As a result, Company A fell into serious financial difficulty to the point that it could not pay employee wages and severance pay, and it reached the verge of closing down.
2. Monopoly Regulation and Fair Trade Act | Legal Issues
As a general rule, a business may freely determine its trading counterparties and trading terms.
However, the Monopoly Regulation and Fair Trade Act prohibits conduct that disadvantages a trading counterparty through the abuse of a superior bargaining position.
In particular, in the following circumstances, even a mere reduction of transactions may amount to a 'refusal to deal'.
The Supreme Court has likewise held that “a refusal to deal that risks depriving a particular business of its trading opportunities and thereby hindering its business activities constitutes an unfair trade practice under the Monopoly Regulation and Fair Trade Act” (Supreme Court, Decision of May 26, 2005, 2004 Du 3038).
Progress of the Case
Unilateral Preparation of Documents Inconsistent with the Agreement
Company B initially notified Company A that it would transfer part of the volume to another company, and Company A, through consultation, agreed to a partial transfer.
Afterward, however, Company B unilaterally prepared and delivered meeting minutes that made it appear as though a volume transfer had occurred at a level different from what had been agreed.
Continued Reduction of Volume
Although the parties had reached a renewed agreement through further consultation to transfer only part of the volume, Company B managed the volume unstably, citing reasons such as inventory management, and thereafter continuously decreased its order volume.
As a result, Company A came to face serious difficulties in its workforce operations and in its overall management.
Shifting Responsibility After a Sudden Increase in Volume
Company B temporarily placed orders for a large volume and, in a situation in which its production conditions had deteriorated, pressured Company A, which found it difficult to handle the entire volume, by shifting the responsibility for the delivery delays onto it.
Failure to Honor the Promise of a Guaranteed Minimum Volume
When Company A gave notice of legal action, Company B promised to guarantee a minimum volume, but that promise was not honored.
On the contrary, it subsequently sent an official letter indicating that it might further reduce the volume.
Accordingly, Company A determined that resolution through consultation was no longer feasible and proceeded with legal action.
3. Monopoly Regulation and Fair Trade Act | Daeryun's Assistance
The attorneys at Daeryun Law Firm LLP experienced in fair trade matters determined that this matter constituted an unfair trade practice under the Monopoly Regulation and Fair Trade Act and filed a report with the Fair Trade Commission.
The principal arguments were as follows.
- The transaction volume had decreased over several years to less than half of the previous level.
- No reasonable justification whatsoever was presented for the reduction of transactions.
- The client was effectively dependent on a single trading partner.
- The counterparty, as an influential business in the industry, held a superior bargaining position.
- The reduction of transactions did not enhance market efficiency or consumer welfare in any way.
By comprehensively organizing these facts and legal principles, the firm submitted a persuasive report.
Case Result
After the report was filed with the Fair Trade Commission, the counterparty recognized the legal risk and came to the negotiating table.
As a result, a settlement was reached between the parties without a separate investigation or sanction procedure, and the client was able to receive substantial compensation.
This is an instance in which accurate legal analysis and a strategic response at the early stage led to a practical resolution.
4. Monopoly Regulation and Fair Trade Act | Implications
This case offers the following implications.
Even a Reduction of Transactions May Be Unlawful
Even a large corporation may be found to have violated the Monopoly Regulation and Fair Trade Act where, without a reasonable justification, it reduces transactions and thereby makes a subcontractor's business activities difficult.
A Report to the Fair Trade Commission Is an Effective Means of Response
The filing of a report alone imposes a considerable legal burden on the counterparty, and, as in this case, it is not uncommon for a dispute to be resolved at a stage prior to an investigation by the Fair Trade Commission.
Securing Evidence Is Important
In this case as well, objective materials such as emails, meeting minutes, and order records played a key role.
Where a dispute with a trading partner is anticipated, a procedure for systematically preserving the relevant materials is necessary.
The Need to Review Whether the Monopoly Regulation and Fair Trade Act Has Been Violated
If your situation resembles the above, it may be worth reviewing whether the Monopoly Regulation and Fair Trade Act has been violated.
Drawing on experience accumulated in the field of fair trade, Daeryun Law Firm LLP offers clients practical solutions for the protection of their rights and interests.
If you need assistance with a related matter, you are welcome to schedule a 🔗consultation with a fair trade attorney who, drawing on experience at the Fair Trade Commission, handles fair trade matters, and to prepare a response to your concern.
Our firm provides services for corporate clients, including telephone, video, and on-site consultations.
