Antimonopoly & Unilateral Conduct

Last verified on Tuesday 30th August 2016

Korea

Gene-Oh (Gene) Kim, Young Joon Kim and Maria Hajiyerou
Kim & Chang

    Overview

  1. 1.

    What is the legal framework governing unilateral conduct by companies with market power?

  2. The Monopoly Regulation and Fair Trade Act (FTL) is the primary antitrust statute in Korea. The FTL governs, among others, unilateral conduct by companies with market power, and is further supplemented and supported by the Enforcement Decree to the FTL (Enforcement Decree) and Guidelines on the Review of Abuse of Market Dominant Position (Guidelines). 

  3. 2.

    What body or bodies have the power to investigate and sanction abuses of market power?

  4. The Korea Fair Trade Commission (KFTC) has regulatory power to investigate and enforce violations of the FTL, including abuse of market dominance. The KFTC is a ministerial-level central administrative organisation and also functions as a quasi-judiciary body. In addition, the Public Prosecutors’ Office may investigate and criminally prosecute violations of the FTL generally upon referral from the KFTC.

    Monopoly power

  5. 3.

    What role does market definition play in market power assessment?

  6. Under the FTL, the relevant market should be determined as a premise to assess whether a company holds market power or market dominance, and is thus the first step in the assessment of market power.

  7. 4.

    What is the approach to market definition?

  8. The Korean Supreme Court (the highest judicial tribunal in Korea) generally defines the relevant product market and relevant geographical market based on the SSNIP test; the Guidelines essentially include the same standard in defining the relevant markets. In particular, according to the Supreme Court decisions, the factors that should be taken into account when defining the relevant product market include, among others, similarity of the relevant product, purchasers’ perception on substitutability, sellers’ perception on substitutability, pace of technological advancement as well as raw material or end product market situation.

  9. 5.

    How is market power or monopoly power defined?

  10. The FTL defines ‘market-dominating enterprise’ to mean an enterprise holding a market dominant position that can determine, maintain, or change the price, quantity or quality of commodities or services, or other business terms and conditions as a supplier or customer in a particular business area, individually or jointly with other enterprisers. Under the FTL, unilateral conduct by companies without market dominance are also regulated as unfair trade practices, which require either unfairness or anti-competitiveness depending on the types of unfair trade practices. For instance, refusal to deal, discriminatory dealing and exclusive dealing require anti-competitiveness. Under the Unfair Trade Practices Guidelines, in assessing anti-competitiveness of the relevant unfair trade practices, the KFTC must first review whether the relevant entity has market power, which is defined as the entity’s ability to affect price, trade terms, etc. to some degree. Under the Unfair Trade Practices Guidelines, parties with 30 per cent or more market share are presumed to have market power, while those whose share falls in the range of 20 to 30 per cent may be deemed to have market power depending on factors such as market concentration, competitive situation, and product characteristics.

  11. 6.

    What is the test for finding of monopoly power?

  12. The FTL and Guidelines provide that market share, entry barrier, size and strength of rivals, possibility of collusion among rivals, similar products and adjacent markets, market power in downstream/upstream markets, financial resources, ability to switch transaction partners, whether to possess intellectual property rights, etc should be taken into account.

  13. 7.

    Is this test set out in statute or case law?

  14. The test for finding market dominance is set forth in the FTL and Guidelines.

  15. 8.

    What role do market shares play in the assessment of monopoly power?

  16. In practice, market share has greatest importance among the various factors when assessing market dominance under the FTL, unless it is otherwise proved that market share cannot be a valid proxy measure of dominance due to special conditions and/or other factors.

  17. 9.

    Are there defined market share thresholds for a presumption of monopoly power?

  18. The FTL presumes market dominance if an enterprise has a market share of 50 per cent or more, or if the top three enterprises’ total market share is 75 per cent or more (with no individual enterprise having less than a 10 per cent share).

  19. 10.

    How easily are presumptions rebutted?

  20. Based on KFTC and court precedents, it is fair to view that the presumption is rather strong and practically difficult to rebut.

  21. 11.

    Are there cases where companies with high shares have been found not to exercise monopoly power?

  22. We did not find any court case where a market dominant position itself was denied by the court to companies with high shares when charged with abuse of market dominance by the KFTC, although in many cases, the companies were eventually found to not have engaged in the relevant abusive conduct in violation of the FTL.

    That said abuse of market dominance (as discussed below) has relatively stringent requirements. Rather than pursue allegations of abuse of market dominance against companies with high shares, in some cases the KFTC has pursued charges of unilateral conduct based on a unique feature of the FTL, where unilateral conduct may constitute either abuse of market dominance or an unfair trade practice (which carries less serious sanctions than abuse of market dominance). Generally speaking, these two types of violations do not differ significantly in terms of the facts that give rise to them, although the unfair trade practice provisions do not require the relevant party’s market dominance (while certain types of unfair trade practices require the relevant party’s market power).

  23. 12.

    What are the lowest shares with which companies have been found to exercise monopoly power?

  24. Based on the combined 75 per cent presumption rule, a second or third market player in a relevant market may be found to have a dominant position. Under this presumption rule, the KFTC has determined that the second largest telecom company of Korea, with 25.24 per cent market share, was presumed to market dominant given the combined 79 per cent market share when included with the top three companies.    

  25. 13.

    How important are barriers to entry and expansion for the assessment of monopoly power?

  26. Entry barriers are listed as the second important factor after market shares under the Guidelines. If new entries in the market can be easily made in the near future, this may lower the possibility of being found a market dominant enterprise.

  27. 14.

    Can the lack of entry barriers negate a finding of monopoly power?

  28. The lack of entry barriers may be a valid ground to deny market dominance, to the extent that it may be supported by other factors under the Guidelines.

  29. 15.

    What kind of barriers to entry are typically considered in the analysis?

  30. The various types of barriers should be considered as a whole under the Guidelines, including legal and regulatory barriers, capital requirement, intellectual property and production technology, physical location, raw material procurement, distribution channel and tariff and non-tariff barriers.

  31. 16.

    Can countervailing buyer power negate a finding of monopoly power?

  32. The existence of large-volume buyers in the relevant market is a mitigating factor under the Guidelines when determining market power.

  33. 17.

    What if consumers can easily switch between suppliers?

  34. A company’s ability to switch its transacting parties is considered under the Guidelines when determining market dominance. Further, the Guidelines stipulate that the existence of similar products and adjacent markets are another mitigating factor in assessing market dominance.

  35. 18.

    Are there any other factors that the regulator considers in its assessment of monopoly power?

  36. See the answer to question 6 above.

  37. 19.

    Are any entities or sectors exempt from the antimonopoly regime?

  38. No specific industry is expressly exempt from the FTL enforcement. Rather, article 58 of the FTL provides that the FTL does not apply to justifiable acts of a business entity, undertaken pursuant to another statute or an order. Therefore, conduct in highly regulated industries may claim exemption pursuant to this provision. However, since both the KFTC and Korean Supreme Court have interpreted article 58 stringently, in practice, defences invoking this provision are rarely accepted.

  39. 20.

    Can companies be deemed to hold collective monopoly power?

  40. Although the FTL provides that an enterprise can hold a dominant position jointly with other enterprises, it is generally understood that the concept of a collective dominant position as discussed in the context of EU competition law is not adopted under the FTL.

    However, as market dominance is presumed to exist under the FTL for the top three companies with the combined market share of 75 per cent or more unlike EU competition law, a dominant position may be more widely found than EU competition law, even without the concept of collective dominant position.

  41. 21.

    Can the exercise of joint monopoly power or tacit oligopolistic collusion be treated as an infringement?

  42. As discussed above, it is generally understood that the FTL does not recognise the concept of abuse of a collective dominant position, but each of the top three companies can be deemed to be dominant if their combined market share is 75 per cent or more.

  43. 22.

    Has the competition authority published guidance on how it defines markets and assesses market power?

  44. Yes. The Guidelines provide detailed guidance on market definition and assessment of dominant position.Also, with respect to the unfair trade practices, the Unfair Trade Practices Guidelines provide detailed guidance on how to assess market power.

    Abuse of monopoly power

  45. 23.

    Is there a general definition for what constitutes abusive conduct? What does it entail?

  46. There is no general definition for abusive conduct under the FTL, which, instead, lists the following types of conduct as constituting abuse of a market dominant position: (i) unfair pricing; (ii) unfair output restriction; (iii) unfair business interference; (iv) unfair obstruction of entry; and (v) unfair exclusion of competitors or acts that may considerably harm the interest of consumers, as further described in question 25 below.

  47. 24.

    What are the general conditions for finding an abuse?

  48. According to the Korean Supreme Court, ‘unjustness’ must be established in order to find an abuse of dominance under the FTL. ‘Unjustness’ essentially requires the existence of an anti-competitive intent and purpose, and the likelihood of anti-competitive effect (in the form of higher prices, reduced output, restricted innovation, reduced number of effective competitors, reduced diversity, etc).

  49. 25.

    Is there a list of categories of abusive or anti-competitive conduct in the applicable legislation?

  50. Yes. See the answer to question 23 above.

    The FTL provides five categories of abusive conduct: (i) an act determining, maintaining, or changing unreasonably the price of products or services (‘unfair pricing’); (ii) an act unreasonably controlling the sale of products or provision of services (‘unfair output restriction’); (iii) an act unreasonably interfering with the business activities of other enterprises (‘unfair business interference’); (iv) an act unreasonably impeding the participation of new competitors (‘unfair obstruction of entry’); and (v) an act unfairly excluding competitive enterprises, or which might considerably harm the interests of consumers.

  51. 26.

    Is this list open or closed?

  52. While the five specific categories of abuse under the FTL are a closed list, the categories themselves are broadly defined and therefore, open to additional interpretation. In addition, the Guidelines provide for more specific types of conduct that would be captured by each of those categories.

  53. 27.

    Has the competition authority published any guidance on what constitutes abusive conduct?

  54. Yes. The Guidelines provide detailed guidance on determination of abusive conduct.

  55. 28.

    Is certain conduct per se abusive (without the need to prove effects) and under what conditions?

  56. There is no category of abusive conducts listed under the FTL as per se abusive, and anti-competitive effect must be established in order to constitute any category of abusive conduct. 

  57. 29.

    To the extent that anti-competitive effects need to be shown what is the standard to demonstrate these effects?

  58. The Korean Supreme Court introduced a so-called effects-based approach (standard) in the POSCO case in 2007, and has consistently confirmed such standard in subsequent decisions in abuse cases. See question 24 above for the details of such standard. 

  59. 30.

    Does the abusive conduct need to harm consumers?

  60. The FTL regulates both exclusionary and exploitative conduct under the abuse of market dominance provisions. In this regard, the conduct of market dominant enterprises, such as unfair pricing, unfair output restriction, unfair business interference and any other conduct that may considerably harm the interest of consumers in general may be regulated as exploitative abuse against trading partners or consumers as a whole.

  61. 31.

    What defences are there to allegations of abuses of monopoly power?

  62. As the FTL requires the KFTC to establish 'unjustness' to find an abuse of market dominance, respondent companies may defend their conduct by showing that an alleged abusive conduct had legitimate business justifications, which will vary in each case. In particular, if a market dominant company can demonstrate that its conduct is based on legitimate business reasons; such conduct may not be regarded as being motivated by anti-competitive intent or purpose, which is required by the Korean Supreme Court as an element of unjustness. In addition, lack of foreclosure (in case of exclusionary abuse) or absence of consumer harm (in case of exploitative abuse) may be presented as a defence to an alleged abuse, which also requires anti-competitive effect. In this connection, respondent companies may attempt to establish that the relevant efficiency-enhancing effect outweighs any alleged anti-competitive effect.

  63. 32.

    Can abusive conduct be objectively justified?

  64. The concept of objective justification as discussed in EU competition law has not been expressly recognised by the Korean courts or the KFTC as an acceptable defence. However, as discussed in question 31, legitimate business justifications and efficiency-enhancing effects may be presented as a defence to alleged abuse of market dominance.

  65. 33.

    What objective justifications have been successful?

  66. Various types of justifications have been accepted by the courts to successfully negate the element of ‘unjustness’ for an alleged abuse. Notably, in the SKT Melon Service case in 2011, the Korean Supreme Court denied the alleged abuse of market dominance by holding that adoption of a DRM policy, which was intended to prevent piracy, could not be condemned as anti-competitive despite having an ancillary restrictive effect on customers. In the POSCO case in 2007, POSCO, a market dominant player in the intermediary steel market, refused to supply intermediary steel products to Hyundai Hysco on the basis that Hyundai Hysco, which had begun manufacturing downstream steel products, would become POSCO’s competitor in the downstream market. The Supreme Court held that POSCO’s refusal to deal did not constitute an abuse on the ground that, among others, Hyundai Hysco secured a stable foreign supplier of intermediary steel and could manage a profitable downstream business. Further, in the NHN case in 2014, the Supreme Court held that certain disadvantage against a specific transaction partner, stemming from a legitimate business model to enhance its overall customer welfare, cannot be an unjustly forced disadvantage as an element for the alleged type of abusive conduct.

  67. 34.

    How is the burden of proof distributed in an abuse analysis?

  68. The KFTC generally bears the burden of proving the requirements to demonstrate abuse of market dominance, including the existence of an anti-competitive intent and purpose and the likelihood of anti-competitive effect.

    However, certain types of abusive acts set forth in the FTL and Enforcement Decree (eg, refusal to deal, discontinuance or limitation of use or access to essential facilities) require that such alleged abusive acts must have been performed without ‘justifiable cause’. For such cases, there is a debate among academic scholars on whether the burden of proving ‘justifiable cause’ shifts to the respondent company. There are no Korean Supreme Court precedents on this issue regarding abuse of market dominance; however, in cases involving unfair trade practices, the Supreme Court has explicitly ruled that the burden of proof shifts to the respondent company.

  69. 35.

    What are the legal conditions to establish an abusive tie?

  70. Under the FTL, tying may be considered both an unfair trade practice and an abuse of market dominance (under the third category of abusive conduct as discussed in question 25).

    To constitute tying as an abuse of market dominance, in addition to a finding that the relevant enterprise is market dominant and the existence of both anti-competitive intent and effect, there must be (i) a separate tying product and tied product, (ii) forced purchase of the tied product on a counterparty, and (iii) resulting disadvantage to the counterparty.

  71. 36.

    What are the legal conditions to establish a refusal to supply or refusal to license?

  72. A refusal to deal is regulated as a specific type of unfair business interference (the third category of the abusive conduct as discussed in question 25 above) under the Guidelines. To establish a refusal to deal, the following conditions are required: (i) market dominance of the enterprise; (ii) refusal to deal with a certain party; and (iii) unfairness (see the discussion in question 24 above for further details on the Korean Supreme Court interpretation of unfairness). Refusal to supply is also regulated as a type of unfair trade practice under the FTL, and the Unfair Trade Practices Guidelines provides that, in principle, it is appropriate to regulate a refusal to supply only when the relevant entity is deemed to have market power (i.e., market share of at least 30 per cent).

    With respect to the refusal to license, the KFTC’s Guidelines for Review of Intellectual Property Rights (IPR Guidelines) provides further guidance on its legal conditions by stating that the refusal of a licence grant in general by a patent holder in order to protect its rights can be considered a legitimate exercise under patent rights, although certain practices are likely to be considered unreasonable, and therefore, going beyond the legitimate scope of patent rights. Such practices may be found when (i) the purpose of the refusal to trade relates to restraining competition, (ii) the refused technology is an essential element of business activities, (iii) the technology is extremely influential in the relevant market (eg, standard technology), (iv) the use of the technology has been excessively impeded through a refusal to grant licences even though the patent holder itself did not have the intent to use the technology.

  73. 37.

    Do these abuses require an essential facility?

  74. Basically, yes as provided in the Enforcement Decree, which specifically states that 'refusing, discontinuing, or limiting the use of or access to essential facilities for the manufacture, provision, or sale of products or services of other enterprises without justifiable reason' will be considered a form of unreasonable business interference. However, in cases of refusal to license, the IPR Guidelines provide for other instances of unreasonable refusal, as discussed in question 36 above.

  75. 38.

    What is the test for an essential facility?

  76. The following three-prong test should be satisfied for an essential facility: (i) ‘essentiality’ (no other party is able to manufacture, provide or sell certain products or services without using such element, and as a consequence, these parties are barred from entering the relevant market or inevitably and continuously placed at a materially inferior position in competing in the market); (ii) ‘control’ (one enterprise has monopolistic control or ownership over the element); and (iii) ‘lack of substitutability’ (legally, practically and economically, the element is not duplicable or substitutable for the parties desiring the use of or access to it).

  77. 39.

    What is the test for exclusivity arrangements?

  78. Several types of exclusivity arrangements are listed as specific types of abusive conduct under the Enforcement Decree and the Guidelines, including, (i) forcing or inducing, without justifiable reason, raw material suppliers to not supply products to other enterprises, (ii) entering into an exclusive contract with a transacting distributors without justifiable reason, and (iii) unreasonably transacting with a partner under the condition that the partner does not transact with a competing enterpriser.

    Similar to other forms of market dominance abuse, the illegality of exclusivity arrangements is assessed based on the relevant enterpriser’s market dominant position and the anti-competitive effects brought about by the abusive act. In the case of exclusivity arrangements, the underlying rationale for the enterpriser’s introduction of such contract or condition, and the foreclosure effect of such acts would be considered in particular. Exclusive dealing by entities with market power (not market dominance) may be also regulated as an unfair trade practices under the FTL.

  79. 40.

    What is the test for predatory pricing?

  80. Predatory pricing schemes are covered under the FTL as a part of unfair exclusion of competitors (the fifth category of abusive conduct as discussed in question 25 above). The Guidelines provide that predatory pricing occurs where a market dominant company supplies goods or services at an unfairly low price in comparison with the customary market price or purchases goods or services at an unfairly high price in comparison with customary market prices, raising concerns that competitors may be excluded.

    In determining whether prices are unfairly low or high, the Guidelines comprehensively review various factors, including the degree of difference with standard market prices, volume and duration of the sale, type of relevant product, and nature of supply of the relevant product. In determining whether the price increases may exclude competitors, the KFTC comprehensively considers, among others, the intent, existence of similar products and neighbouring markets, market position of the market dominant company and its competitors, and funding capacity.

  81. 41.

    What is the test for a margin squeeze?

  82. The margin squeeze is not specifically listed as a form of abusive conduct under the FTL. However, in the recent KT/LG U+ case, the KFTC applied the ‘unfair exclusion of competitors’ provision of the FTL, finding that KT/LG U+, providers of corporate messaging services, abused their market dominant position by supplying their services at an unfairly low price compared to the typical market price, thus potentially excluding competitors in the relevant market for corporate messaging services. In its press release, the KFTC characterised such activities constituted a form of illegal ‘margin squeeze,’ in violation of the FTL. The KFTC appeared to apply the requirements for unfairly low price (predatory prices as discussed in question 40), which requires (i) market dominant position of the relevant enterprise, (ii) sales of a relevant product at a price lower than market price, and (iii) existence of anti-competitive effects.

    The case is currently pending at the Seoul High Court. 

  83. 42.

    What is the test for exclusionary discounts?

  84. Although there are no specific provisions in the FTL regarding rebate schemes, they may be captured by various provisions of the FTL based on their impact to the relevant market.

    In 2008, the KFTC found that Intel tried to exclude AMD from the market for x86 CPUs by providing various loyalty rebates to customers, provided that they purchase a certain percentage of demand from Intel. The KFTC found that such rebates constituted de facto exclusive dealing, assessing Intel’s anti-competitive intent anti-competitive effect based on: (i) the rebates in practice coerced Intel’s customers into maintaining exclusive supply agreements for a considerable period of time (two to three years); and (ii) Intel’s competitors were not able to easily identify other customers during this period. In its decision, the KFTC set out a detailed analysis of the 'foreclosure effect' resulting from the exclusive dealing by analysing Intel’s and its competitors’ market share trends, categorised by period and customer.

    The KFTC also dealt with exclusionary discounts the Qualcomm case. The KFTC held that exclusive dealing as an unreasonable exclusion of competitors does not necessarily require that competitors must be entirely foreclosed as a result of the dealing. Rather, Qualcomm was determined to have sufficient exclusionary intent in offering conditional rebates based on the purchase of a certain percentage of demand, given Qualcomm’s market dominant position in a market with high entry costs and protected by intellectual property, and act of interfering with a competitor’s efforts to achieve an economy of scale by requiring customers to refrain from transacting with such competitor based on such purchase requirements.

  85. 43.

    Are exploitative abuses also considered and what is the test for these abuses?

  86. As discussed, exploitative abuse is also regulated under the FTL. For instance, the FTL prohibits 'unreasonable fixing, maintaining, or altering the price of goods or services' by the market dominant enterprises, which encompasses abusive acts of dominant entities setting 'exploitative prices, terms or conditions of supply'. The Enforcement Decree also prohibits the act of a market dominant entity 'sharply increasing or insufficiently decreasing, relative to the changes in the cost of production, the price of goods or services, without justification'. Moreover, if it is determined that the interests of consumers are considerably harmed by such a price increase, the conduct may constitute an act that causes considerable harm to the interests of consumers.

    Cases involving exploitative conduct in the form of excessive pricing and/or output restriction in Korea are quite rare, while there are several cases involving exploitative conducts falling within the category of abusive conducts that may considerably harm the interest of consumers.

  87. 44.

    Is there a concept of abusive discrimination and under what conditions does it raise concerns?

  88. Discriminatory abuse of market dominance, which includes discriminatory pricing, constitutes a type of unfair business interference. Discriminatory abuse occurs where a market dominant company unfairly discriminates pricing or other transaction terms when compared with normal transaction practices. The representative precedent case is the Qualcomm case as discussed herein.

    Discriminatory dealing is also regulated as unfair trade practices under the FTL, and the Unfair Trade Practices Guidelines provides that, in principle, it is appropriate to regulate discriminatory dealing only when the relevant entity is deemed to have market power (ie, market share of at least 30 per cent).

  89. 45.

    Are only companies with monopoly power subject to special obligations under unilateral conduct rules?

  90. As discussed, unilateral conduct can be regulated as an unfair trade practice under the FTL, which does not require any dominant position in the relevant market. For example, abuse of a superior bargaining position is prohibited as one form of unfair trade practices under the FTL, which permits the KFTC to regulate a private transaction to ensure fairness if it finds that one party has a superior bargaining position and imposes terms and conditions disadvantageous to the other inferior trading partner regardless of whether the superior party has market dominance or market power.

  91. 46.

    Must the monopoly power exist in the same market where the effects of the anti-competitive conduct are felt?

  92. No. ‘Monopoly leveraging’, which involves exercise in the downstream market of monopoly power obtained from the upstream market, is regulated under the FTL.

    The FTL does not require proof of achievement of high-level market dominance in the downstream market where restrictive effect on competition is evidenced, or a high likelihood of restrictive effect thereof. Based on an interpretation of the provisions prohibiting abuses of dominant market position, monopoly leveraging broadly includes a dominant enterpriser’s exercise of its market position to restrict competition in another market. Such prohibitive provisions do not require proof of a dangerous probability of monopolising the second market. For example, in the POSCO case, the Supreme Court held that POSCO leveraged its market dominant position in the upstream market of hot-rolled coil by refusing to supply raw materials to a competing enterprise for use in the downstream market for cold-rolled steel.

    Sanctions and remedies

  93. 47.

    What sanctions can the competition authority impose or recommend?

  94. The following sanctions may be imposed against the market dominant enterprise for violating the FTL: (i) issuing a cease-and-desist order regarding the violating activity; (ii) requirement to publicly announce the receipt of a cease and desist order, (iii) levy of administrative fines of up to 3 per cent of the relevant turnover, and/or (iv) criminal penalties of up to three years' imprisonment or criminal fine of up to 200 million won. Further, criminal penalties may be imposed only if the KFTC refers its case to the Prosecutor’s Office for prosecution.

  95. 48.

    How are fines calculated for abuses of monopoly power?

  96. Administrative fines may not exceed 3 per cent of the relevant sales turnover, or 1 billion won if the sales turnover does not exist or is difficult to calculate. The Notification on the Criteria for Imposition of Administrative Fines provides the specific standards for imposing administrative fines on FTL violations, including abuse of market dominance cases. In addition, criminal fines are also possible if the matter is referred to the Prosecutor’s Office for criminal prosecution.

  97. 49.

    What is the highest fine imposed for an abuse of monopoly power?

  98. To date, the highest fine imposed for abuse of market dominance was 260 billion won, which was imposed in the Qualcomm case. This case involved (i) de facto exclusive dealing, assessed as unfair exclusion of competitors and (ii) discrimination, which was as assessed as unfair business interference. The fine of 260 billion won was calculated at a level of 2.2 per cent of the relevant turnover related to abuse of market dominance.

    Although the KFTC’s decision was upheld by the Seoul High Court, it remains pending on appeal before the Supreme Court.

  99. 50.

    What is the average fine imposed over the past five years?

  100. According to the KFTC 2015 Statistics Yearbook, there were a total of five cases from 2010 to 2014 where fines were imposed for abuse of market dominance; the average fine per each case was approximately 2.3 billion won.

  101. 51.

    Can the competition authority impose behavioural remedies?

  102. Yes. There are several remedies available to correct an abuse of market dominance. Article 5 of the FTL allows the imposition of corrective measures, providing that there has been an act violating the provisions of article 3-2. The KFTC may order the market dominant enterprise to reduce prices, discontinue the violating act, and/or take any other measure necessary to correct the violation.

  103. 52.

    Can it impose both negative and positive behavioural obligations?

  104. Yes. The KFTC may order the market dominant enterprise to reduce prices, discontinue the act that is a violation, and/or take other measures necessary for correction. According to the KFTC Guidelines for Operation of Corrective Measures, and if the violation can be effectively corrected, the KFTC may not only impose negative measures, but may also choose to impose positive measures within the scope reasonably required and in proportion with the degree of the violation.

  105. 53.

    Can the competition authority impose structural remedies?

  106. While the KFTC is empowered to impose any corrective order it deems necessary to remedy any anti-competitive effects arising from antitrust violations, there have been no structural remedies ordered for abuse of market dominance to date.

  107. 54.

    Can companies offer commitments or informal undertakings to settle concerns?

  108. The KFTC adopted a consent decree process in November 2011. Under the consent decree process, companies under investigation by the KFTC may voluntarily propose corrective measures to restore competitive order and remedy any potential consumer harm. 

  109. 55.

    What proportion of cases have been settled in the past five years?

  110. A consent decree system was first implemented in 2011, although the first consent decree orders were entered in 2014. As such, there are only a limited number of cases to date including Naver/Daum (discussed in question 61). 

  111. 56.

    Have there been any successful actions by private claimants?

  112. Article 56 of the FTL provides a private right of action to claim for damages caused by antitrust violations including abuse of market dominance. Where it is difficult for the party injured by antitrust violations to provide sufficient evidence on the amount of damages to be awarded, the court may determine the appropriate amount under its discretion.

    While there have been no recent cases where the court granted damages caused by abuse of market dominance, the number of private action claims have increased, particularly for cartel violations, and it is anticipated that private actions will also increase for other types of FTL violations including abuse of market dominance. For example, in 2013, three civil actions were filed against Microsoft after the KFTC found that Microsoft engaged in illegally tying. Notably, the lower courts held that although the court has discretion to award damages amounts where the injured plaintiffs have difficulty providing sufficient evidence of damages, the plaintiffs nonetheless bear the burden of proving causation. 

    Appeals

  113. 57.

    Can a company appeal a finding of abuse?

  114. There are two methods to appeal a decision by the KFTC: (i) filing an objection to the KFTC within 30 days from receipt of the decision; and (ii) initiating administrative litigation with the Korean courts within 30 days from the receipt of the decision (or the KFTC’s second decision if an initial object to the KFTC was filed). Such objection and administrative litigation may be raised selectively or concurrently. If an objection is filed first, administrative litigation may be filed on the second decision rendered by the KFTC upon such objection.

    In addition, a party filing an objection to the KFTC decision may also file a request for the suspension of enforcement of the order in order to prevent irrecoverable damages, which may be incurred due to the performance of the corrective order.

    A request to stay the effect or execution of the KFTC’s decision may be filed with the court upon the initiation of the administrative litigation in order to prevent irreparable damages, which may be incurred due to the execution of the decision.

    Finally, decisions by the Seoul High Court decision may be ultimately appealed to the Supreme Court.

  115. 58.

    Which fora have jurisdiction to hear challenges?

  116. The Seoul High Court has jurisdiction over challenges to the KFTC’s decision. The Supreme Court has jurisdiction to hear appeals of decisions of the Seoul High Court.

  117. 59.

    What are the grounds for challenge?

  118. With respect to the filing an objection within the KFTC, the enterprise may assert not only the illegality of the KFTC’s decision, but also its unreasonableness. On the contrary, the grounds for filing an administrative litigation will be limited to the illegality of the KFTC’s decision.

  119. 60.

    How likely are appeals to succeed?

  120. According to the KFTC 2015 Statistics Yearbook, there were 122 litigations related to KFTC cases for all violations of the FTL (including administrative actions and claims for state’s compensation that KFTC was responsible for) finalised in 2015. Among these litigations, the KFTC succeeded in 90 cases (73.8 per cent), partially won 17 cases (13.9 per cent), and lost 15 cases (12.3 per cent).

    Topical issues

  121. 61.

    Summarise the main abuse cases of the last year in your jurisdiction.

  122. IThe KFTC initiated its investigation of Oracle on grounds that it allegedly abused its market dominance and superior trading position by forcibly providing its tied products combining Data Base Management System (DBMS) support service and next DBMS version and forcing its customers to purchase unnecessary DBMS support service for all licensed products. However, following full hearings of the Commission, the KFTC found that Oracle had not violated the FTL on the grounds that, among others, Oracle’s policy is a legitimate exercise of its IP right and there is no anti-competitive effect (such as foreclosure) resulting from Oracle’s support policy.

  123. 62.

    What is the hot topic in unilateral conduct cases that antitrust lawyers are excited about in your jurisdiction?

  124. The interplay and balance between intellectual property rights and antitrust laws regarding unilateral conduct remains an area of focus, as illustrated in the KFTC’s IPR Guidelines which regulate, among others, enforcement of standard essential patents (SEPs) and activities by non-practising entities. Recently, the FRAND commitment has become one of the issues that Korean antitrust practitioners are most interested in, particularly in the context of how the competition law views the FRAND-encumbered SEP owner’s refusal to grant licences.

  125. 63.

    Are there any sectors that the competition authority is keeping a close eye on?

  126. According to the KFTC’s recent report to the National Assembly, the KFTC is focused on closely monitoring the certain sectors, including the distribution industry, ICT and pharmaceuticals (which are potentially susceptible to IPR abuses), online platform markets, and franchise businesses. 

    In particular, the KFTC plans to strengthen its monitoring of the abuse of intellectual property rights, such as abuse of SEPs and collusive agreements between competitor-patent licensees to delay or suspend the introduction of competing products, especially in the healthcare and pharmaceutical industries. To further its monitoring efforts, the KFTC also plans to conduct a survey of the online platform markets to check for potential abuses of market dominance, and closely examine possible usurpation of small and medium-sized enterprises' technologies, unfair trade practices in the online shopping and software industries.

  127. 64.

    What future developments can we expect?

  128. The KFTC has made clear that it will continue to investigate abuse of market dominant position and unfair trade practices in the distribution and public sectors, particularly by large conglomerates, as well as increased enforcement against unlawful leveraging of a dominant position in new-growth industries to monopolise neighbouring markets. The KFTC is also expected to continue to prioritise fostering innovation-based competition, including heightening policing of patent holders using patent rights to unfairly foreclose competitors, particularly in the ICT, biotech, pharmaceuticals and renewable energy industries.

    Although the KFTC’s activities in relation to abuse of market dominant cases has declined, greater utilisation of the consent decree system for unilateral conduct cases may be anticipated.

    Finally, a patent-licence linkage system was introduced by the recent amendment of the Pharmaceutical Affairs Act in 2014 modelled from the US Hatch-Waxman Act. Under the newly introduced system, the KFTC would have more opportunities to review antitrust issues in settlement agreements between a listed patent holder and an applicant for approval of generic as certain types of agreements regarding manufacturing or sales of generics should be submitted to the KFTC as well as the Ministry of Food and Drug Safety.

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Questions

    Overview

  1. 1.

    What is the legal framework governing unilateral conduct by companies with market power?


  2. 2.

    What body or bodies have the power to investigate and sanction abuses of market power?


  3. Monopoly power

  4. 3.

    What role does market definition play in market power assessment?


  5. 4.

    What is the approach to market definition?


  6. 5.

    How is market power or monopoly power defined?


  7. 6.

    What is the test for finding of monopoly power?


  8. 7.

    Is this test set out in statute or case law?


  9. 8.

    What role do market shares play in the assessment of monopoly power?


  10. 9.

    Are there defined market share thresholds for a presumption of monopoly power?


  11. 10.

    How easily are presumptions rebutted?


  12. 11.

    Are there cases where companies with high shares have been found not to exercise monopoly power?


  13. 12.

    What are the lowest shares with which companies have been found to exercise monopoly power?


  14. 13.

    How important are barriers to entry and expansion for the assessment of monopoly power?


  15. 14.

    Can the lack of entry barriers negate a finding of monopoly power?


  16. 15.

    What kind of barriers to entry are typically considered in the analysis?


  17. 16.

    Can countervailing buyer power negate a finding of monopoly power?


  18. 17.

    What if consumers can easily switch between suppliers?


  19. 18.

    Are there any other factors that the regulator considers in its assessment of monopoly power?


  20. 19.

    Are any entities or sectors exempt from the antimonopoly regime?


  21. 20.

    Can companies be deemed to hold collective monopoly power?


  22. 21.

    Can the exercise of joint monopoly power or tacit oligopolistic collusion be treated as an infringement?


  23. 22.

    Has the competition authority published guidance on how it defines markets and assesses market power?


  24. Abuse of monopoly power

  25. 23.

    Is there a general definition for what constitutes abusive conduct? What does it entail?


  26. 24.

    What are the general conditions for finding an abuse?


  27. 25.

    Is there a list of categories of abusive or anti-competitive conduct in the applicable legislation?


  28. 26.

    Is this list open or closed?


  29. 27.

    Has the competition authority published any guidance on what constitutes abusive conduct?


  30. 28.

    Is certain conduct per se abusive (without the need to prove effects) and under what conditions?


  31. 29.

    To the extent that anti-competitive effects need to be shown what is the standard to demonstrate these effects?


  32. 30.

    Does the abusive conduct need to harm consumers?


  33. 31.

    What defences are there to allegations of abuses of monopoly power?


  34. 32.

    Can abusive conduct be objectively justified?


  35. 33.

    What objective justifications have been successful?


  36. 34.

    How is the burden of proof distributed in an abuse analysis?


  37. 35.

    What are the legal conditions to establish an abusive tie?


  38. 36.

    What are the legal conditions to establish a refusal to supply or refusal to license?


  39. 37.

    Do these abuses require an essential facility?


  40. 38.

    What is the test for an essential facility?


  41. 39.

    What is the test for exclusivity arrangements?


  42. 40.

    What is the test for predatory pricing?


  43. 41.

    What is the test for a margin squeeze?


  44. 42.

    What is the test for exclusionary discounts?


  45. 43.

    Are exploitative abuses also considered and what is the test for these abuses?


  46. 44.

    Is there a concept of abusive discrimination and under what conditions does it raise concerns?


  47. 45.

    Are only companies with monopoly power subject to special obligations under unilateral conduct rules?


  48. 46.

    Must the monopoly power exist in the same market where the effects of the anti-competitive conduct are felt?


  49. Sanctions and remedies

  50. 47.

    What sanctions can the competition authority impose or recommend?


  51. 48.

    How are fines calculated for abuses of monopoly power?


  52. 49.

    What is the highest fine imposed for an abuse of monopoly power?


  53. 50.

    What is the average fine imposed over the past five years?


  54. 51.

    Can the competition authority impose behavioural remedies?


  55. 52.

    Can it impose both negative and positive behavioural obligations?


  56. 53.

    Can the competition authority impose structural remedies?


  57. 54.

    Can companies offer commitments or informal undertakings to settle concerns?


  58. 55.

    What proportion of cases have been settled in the past five years?


  59. 56.

    Have there been any successful actions by private claimants?


  60. Appeals

  61. 57.

    Can a company appeal a finding of abuse?


  62. 58.

    Which fora have jurisdiction to hear challenges?


  63. 59.

    What are the grounds for challenge?


  64. 60.

    How likely are appeals to succeed?


  65. Topical issues

  66. 61.

    Summarise the main abuse cases of the last year in your jurisdiction.


  67. 62.

    What is the hot topic in unilateral conduct cases that antitrust lawyers are excited about in your jurisdiction?


  68. 63.

    Are there any sectors that the competition authority is keeping a close eye on?


  69. 64.

    What future developments can we expect?