[Exclusive] 'Can't Lower Prices'... Food Firms Hit by Collusion Crackdown Push Back Against FTC Orders

Companies in Sugar, Flour and Starch Sugar Collusion Cases File Administrative Lawsuits
Courts Grant Applications to Stay FTC Orders to Recalculate Prices
Shifting 'Court Climate' Raises Hopes for Reduced Fines

Food companies that were ordered by the Fair Trade Commission (FTC) to pay more than KRW 1.3 trillion in fines and to reset prices over collusion involving sugar, flour, starch and starch syrup have filed administrative lawsuits challenging the orders. As a result, prices for these products are expected to remain unchanged for the time being.

Flour is on display at a large supermarket in Seoul. Yonhap News

According to reporting by The Asia Business Daily on Nov. 9, all 10 food companies penalized with fines and corrective orders filed lawsuits against the FTC at the Seoul High Court seeking, among other things, cancellation of the fines. Nine of the companies also filed applications to temporarily suspend the effect of the FTC's fines and corrective orders.

The court granted all the applications to suspend the “price redetermination orders.” The FTC had ordered the companies found to have colluded to consult on product prices and report them within 90 days of receiving the corrective orders. Under the court's latest decisions, the companies can leave their prices unchanged without facing penalties until the main rulings are issued. Some have criticized the companies, saying that after profiting from unfair practices, they are using lawsuits to try to reduce their fines while also avoiding price cuts.

Food Companies Accused of Collusion Take Hard Line with “Stay of Execution” Applications

According to documents the office of Democratic Party of Korea lawmaker Park Hong-bae obtained from the FTC, all the companies involved in the sugar, flour and starch syrup collusion cases have filed administrative lawsuits challenging the FTC's decisions. They are CJ CheilJedang, Samyang Corporation and TS Corporation, which were fined over alleged sugar collusion; Sajo DongA One, Korea Flour Mills, Samyang Corporation, Daesun Flour Mills, Hantop and Samhwa Flour Mills, which were fined over flour collusion; and Daesang, Sajo CPK and CJ CheilJedang, which were fined over starch syrup collusion.

For their involvement in sugar collusion, CJ CheilJedang was fined approximately KRW 138.3 billion, Samyang Corporation approximately KRW 130.2 billion and TS Corporation approximately KRW 127.3 billion. In the flour collusion case, fines were imposed on Sajo DongA One (approximately KRW 183 billion), Korea Flour Mills (approximately KRW 112 billion), Samyang Corporation (approximately KRW 94.7 billion), Daesun Flour Mills (approximately KRW 38.4 billion), Hantop (approximately KRW 24.2 billion) and Samhwa Flour Mills (approximately KRW 19.4 billion). In the starch syrup collusion case, Daesang was fined approximately KRW 234.1 billion, Sajo CPK approximately KRW 125 billion and CJ CheilJedang approximately KRW 102.9 billion.

The FTC also ordered the companies to reset prices. However, Samyang Corporation and TS Corporation, which were fined in the sugar collusion case, applied to the court for a stay of execution and obtained orders suspending both payment of the fines and enforcement of the price redetermination orders. CJ CheilJedang did not apply for a stay. Samyang Corporation, Daesun Flour Mills and Hantop, which were involved in flour collusion, also obtained stays of the price redetermination orders, while Samhwa Flour Mills filed its application later and the hearing is ongoing. Enforcement of both the fines and price redetermination orders against Sajo DongA One and Korea Flour Mills has been suspended.

In the starch syrup collusion case, CJ CheilJedang obtained a partial grant of its application from the court, suspending the price redetermination order. Sajo CPK applied for a stay, and its application is currently under review. Daesang did not apply for a stay. The companies litigating against the FTC have all hired legal teams from top-10 law firms and are arguing that the FTC's fines are making it difficult for them to conduct business.

A lawyer representing one of the companies accused of collusion said, “At the hearing on the stay of execution, we emphasized the significant financial burden, and the court accepted that argument. We explained the particular nature of the food industry as a capital-intensive sector and argued that paying the fine would make it impossible, in practical terms, to continue operating or pursue new business.”

59 Collusion Cases in Litigation... Strategy Challenges “Connection to Sales”

The FTC has imposed fines for collusion in 59 cases over the past three years that are now being litigated. So far, the FTC has lost only one case, and even that ruling was a partial loss. Twelve of the 59 cases in litigation are food-industry collusion cases that came to light early this year. The main reason the food companies are litigating against the FTC, despite their relatively low odds of winning, is that they believe the fines imposed were set too high.

In court, the companies are actively challenging the criteria the FTC used to calculate sales related to the collusion. Another lawyer said, “In collusion cases, there are always people who confess, and a great deal of indisputable evidence comes to light. Ultimately, the companies admit to collusion in court, but focus on demonstrating that the sales generated as a result were not related to it.” The lawyer added, “Even after legal costs, it is worth contesting the case if the fine can be reduced. There are certainly cases where fines have been reduced, and they can be cut by a substantial amount, so litigation can bring real benefits.”

Courts' Approach to FTC Cases Shifts... FTC Counters with Further Appeals

Joo Byungki (center), chair of the Fair Trade Commission, delivers opening remarks at a government-ruling party meeting on legislative efforts to eradicate repeat collusion, held at the National Assembly on September 28. Photo by Yoon Dongju

The changing approach of the courts to FTC cases is also cited as one reason companies are suing the FTC. Courts have reportedly begun to question the continued increase in fines resulting from what they view as the FTC's excessive use of its authority.

The FTC, too, is taking an aggressive stance toward companies' applications for stays of execution. It has filed further appeals in all cases in which courts granted or partially granted such applications, leaving the Supreme Court to make the final determination. The FTC is also drawing on the precedent of a 2006 flour collusion case in which a court partially granted a stay of execution.

An FTC official said, “The companies actively explained during the stay-of-execution proceedings that the fines had already been recognized as liabilities in their accounts. They also emphasized the risk to their business operations, but a stay-of-execution proceeding is separate from the main trial, so we are responding accordingly.”

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