Ballooning Definition of Cartel and Information Exchange in Korea

Cecil Saehoon Chung, Seung Hyuck Han, Sung Bom Park, Dec 17, 2013

In recent years, antitrust enforcement agencies around the globe have enjoyed more efficient and effective cartel enforcement in no small part thanks to the burgeoning use of leniency programs by cartel members who fear that other cartel members will confess their violations faster in return for leniency. In addition, since the global crackdown of cartel activities and attendant publicity surrounding astronomical fines, and even substantial jail terms, companies and individuals have certainly become more sensitive to the issue. Perversely, at least in some cases, they have also become more sophisticated in entering into and implementing alleged cartel agreements. As a result, these days one would be hard pressed to find an explicit cartel agreement, let alone a written cartel agreement, that neatly sets forth the terms of the agreement complete with signatures.

Against this backdrop, antitrust agencies have pushed the boundaries of the definition of a cartel agreement. In a sense, that is not new. The U.S. antitrust enforcement agencies and private plaintiffs have long fought against accused cartelists regarding such issues as “conscious parallelism” and so-called “facilitating practices.” However, in the United States, the enforcement agencies now tend to pursue these less than clear cut cartel cases as “civil” enforcement cases rather than “criminal” cases that, by definition, require a higher evidentiary standard. This rather well-established “criminal v. civil” treatment in the United States has led to a somewhat more predictable treatment of those concerted practices that fall short of price-fixing or market allocation cartels.

In the European Union, however, where there are no community-wide criminal sanctions for cartels, the European Commission and some member countries have expanded the definition of the prohibited concerted conduct to include certain practices that have not yet universally come to be condemned as cartels. In those cases, the European Commission and national competition agencies have claimed that certain information exchanges amounted to improper concerted conduct by “object.”

Similarly, in Korea, the Korea Fair Trade Commission has endeavored to broaden the reach of the Monopoly Regulation and Fair Trade Act, the South Korean antitrust statute. The KFTC is the primary competition enforcement agency in Korea that imposes corrective measures and administrative fines on violators of the MRFTA. Although it does not conduct “criminal” probes of alleged cartels, based on its administrative investigations the KFTC refers matters to the Prosecutor’s Office for criminal proceedings. Therefore, any KFTC’s determination based on its expanded definition of cartels will likely have a material effect on the criminal enforcement of cartels in Korea. As such, the KFTC’s treatment of information exchange and other facilitating practices and the Korean judiciary’s responses warrant careful review.

In this paper, we will discuss a recent Seoul High Court decision in the case of 16 life insurance companies’ information exchanges. First, we will examine the KFTC’s decision that found the requisite cartel agreement. Then we will discuss the Seoul High Court’s opinion that overruled the KFTC decision. We will then discuss what this may mean to the practice of information exchanges in Korea.

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