The Korea Fair Trade Commission (the “KFTC”) has completed gathering opinions on the “Guidelines for Review of Unfair Collaborative Acts Involving Information Exchange between Business Entities” (the “Guidelines”) during the public comment period that lasted from November 3 to November 23, 2021. The Guidelines provide the criteria and examples for unlawful information exchange cartel, a type of cartel newly created in the amended Monopoly Regulation and Fair Trade Act (the “FTL”) that is to take effect on December 30, 2021.
The amended FTL prohibits an act of restraining competition in the market by agreeing to exchange information on prices, etc. among competitors as a type of cartel, and provides for a legal basis to presume the existence of an agreement based on the evidence of information exchange.
Based on the above amendments, the Guidelines (i) define the concept of information exchange, (ii) set forth matters relating to the illegal information exchange agreement, and (iii) set forth matters relating to the presumption of agreement based on information exchange.
Key details of the Guidelines are as follows:
1. Concept of Information Exchange
Exchange of information is defined as an act of “disclosing” information on price, production volume, etc. directly or indirectly to competitors. Here the means of disclosing information can be by mail, by phone, or verbally, and also include disclosure through intermediaries such as trade associations. In principle, the act of disclosing information to media with public access, such as daily newspapers, is not considered to be an exchange of information. However, any information exchange among competitors that precedes public disclosure would still be subject to regulation.
2. Unlawful Information Exchange Agreement
In order for the exchange of information to be illegal, (i) there must be an “agreement” between competitors on the exchange of competitively sensitive information; (ii) as a result, competition in the market must be unreasonably restrained; and (iii) there must be no efficiency-enhancing effect to offset the anti-competitive effects.
“Agreement” not only includes explicit agreements such as contracts or verbal promises but also tacit or implicit agreements.
“Anti-competitiveness” is more likely to be found for (i) future rather than past information, (ii) information that can identify individual business entities rather than statistical information, (iii) non-public information, and (iv) situations where the period of information exchange is longer, the frequency is higher, and the persons involved are higher-ranked.
However, the Guidelines also stipulate that the exchange of information is not unlawful if it is essential to create an “efficiency-enhancing effect” and such effect actually offsets the anti-competitiveness. Yet the Guidelines provide strict requirements to find an efficiency-enhancing effect, an example being “when it is clear that the exchange of cost information, etc. among SMEs will have the effect of improving productivity through quality or technological improvement, or strengthening bargaining power on transaction terms.”
3. Presumption of Agreement by Information Exchange
The Guidelines provide that an agreement is presumed to exist if (i) there is an external conformity, and (ii) necessary information was exchanged.
External conformity can be deemed to exist even if the competitors’ prices, etc. are not exactly identical if the difference is too small to have any effect on consumer choice.
If the exchange of competitively sensitive information immediately preceded decision-making on price increase, the “exchange of necessary information” may be deemed to have taken place if what is conformed externally corresponds to the exchanged information.
If an agreement is presumed, the business operator may be able to rebut the presumption by proving that the facts do not result from an agreement among competitors. Please note, however, that the Guidelines apply fairly strict requirements.
As the amended FTL is to fully take effect on December 30, 2021, the KFTC is expected to finalize and enforce the Guidelines. As a result, we expect to have better visibility into the KFTC’s new direction for law enforcement in the field of collusion as the KFTC begins their enforcement actions and cases accumulate, for which continuous and detailed monitoring is more important than ever.