Violation of the Monopoly Regulation and Fair Trade Act | The Supreme Court Acquitting Company Y of ‘Allegedly Forcing the Lowest Prices on Franchisees’

The core of this case involving violation of the Monopoly Regulation and Fair Trade Act was to determine whether Company Y had the intent to intervene in the management of individual businesses and engage in unfair trade.

The prosecution brought the case to trial on the view that the system unfairly intervened in the management of restaurants and caused them disadvantages, but both the court of first instance and the appellate court rendered a verdict of not guilty.

The appellate court acquitted Company Y for the following reasons.

1. Positive effect on the delivery app market:

If the application of the non-discrimination clause eliminates differences in food prices across delivery applications, consumers can choose a delivery app based on information, convenience, and benefits, without anxiety over price.

This may contribute to the growth and development of the food delivery market.

2. Legitimacy of the transaction terms:

The fact that a delivery app operator, in order to maintain its business system, requires restaurants that profit through use of the delivery app to refrain from discriminating in their sales prices cannot in itself be deemed an unfair disadvantage.

3. Degree of management interference:

The non-discrimination clause requires restaurants not to discriminate in the prices and services of the Yogiyo delivery app relative to other delivery apps or their own sales channels.

This does not reach the degree of management interference prohibited under Article 11-2, Subparagraph 4 of the Enforcement Decree of the Act on Fair Transactions in Large Retail Business (an act of interference, such as requiring a supplier or others to set, maintain, or change the trading terms, including the price and quantity, of goods sold through another retailer).

In summary, the appellate court determined that the non-discrimination clause could have a positive effect on the development of the delivery market, that the requirement of the transaction terms itself could not be regarded as unfair, and that the degree of management interference did not reach the level of a violation of the law.

The Fair Trade Act is the abbreviated name for the Monopoly Regulation and Fair Trade Act, a statute enacted to ensure fair competition in the market.

It was enacted to prevent monopolies, oligopolies, and unfair trade, to promote fair and free competition, to prevent consumer harm caused by unfair conduct among companies, and to protect small and medium-sized enterprises from unfair conduct by large corporations.

Article 45 of the Monopoly Regulation and Fair Trade Act provides for 🔗unfair trade practices.

CASE 1. A Case in Which a Comparison-Shopping Search Algorithm Was Manipulated and a 26.6 Billion Won Penalty Surcharge Was Imposed

In 2022, Portal Company N, which had manipulated the exposure rankings of product search results in its comparison-shopping service to support its own shopping-mall platform service, received a penalty surcharge of approximately 26.6 billion won.

The Fair Trade Commission determined that Company N had engaged in discrimination in transaction terms as a form of abuse of a market-dominant position under the Monopoly Regulation and Fair Trade Act, in unfair discriminatory treatment as a form of unfair trade practice, and in unfair customer inducement as a form of unfair trade practice.

Company N filed a lawsuit seeking revocation of the Fair Trade Commission's disposition, but ultimately lost the case.

CASE 2. Reducing a Supplier's Distribution Margin on Dedicated Chicken Oil to Zero Won, With a Penalty Surcharge of Approximately 300 Million Won Imposed

In 2024, Chicken Brand K received a corrective order along with a penalty surcharge of approximately 300 million won for unilaterally reducing its suppliers' distribution margin on dedicated chicken oil and adjusting it to the suppliers' disadvantage.

When the price of the dedicated oil surged in the wake of COVID-19, Company K unilaterally reduced its suppliers' distribution margin from 1,350 won per can to zero won, even during the contract period.

As a result, the suppliers incurred distribution-margin losses amounting to approximately 700 million won.

The Fair Trade Commission determined that Company K's unilateral reduction of the margin guaranteed under the contract constituted unfair trade through the improper use of its position in the transaction.