The Monopoly Regulation and Fair Trade Act of Korea(herein after the “Act”) prohibits certain types of act as a market dominating enterpriser’s act of abusing its status(for example, a transaction refusal act). However the Act requires the existence of “unfairness” in market dominating enterpriser’s act. So there has been a dispute with regard to how to determine the existence of “unfairness”.

This case is the first Supreme Court’s decision on that key issue in anti-trust law where POSCO refused to supply hot rolled steel coils to a local company. The Supreme Court held that “unfairness should be acknowledged only where a transaction refusal act can be deemed as perpetrated with intent or objective of maintaining or reinforcing monopolistic status at the market, i.e., influencing a market order artificially by restricting a free competition at the market, and with the evaluation that the refusal act is likely to have anti-competition effects from the objective point of view”.

Also the court held that “the party alleging a market dominating enterpriser’s act of abusing its status must prove that the transaction refusal has the intent and objective as an act likely to cause effects of suppressing a competition such as price increase of the goods, decrease in output, harming the innovation, decrease in the number of capable competitors, decrease in diversity, etc. If the above effects are proven to appear actually, it can be inferred that the act was likely to cause suppression upon competition, and there was intent or purpose as to this.”

The court further held that “If the above effects are not proven, it should be determined whether the act of refusal has the intent or purpose as an act likely to suppress the competition effectively by considering various factors as a wholesuch as the circumstance or motive of transaction refusal, attitudes, characteristics of the relevant market, degree of disadvantage due to refusal, existence of change in price and output, harm to innovation and reduction in diversity, etc.”

Finally the Supreme Court decided that there is “lack of proof that competitions restraining effects such as production decrease or price increase were likely to occur due to a transaction refusal act [by POSCO]”.

The Supreme Court reversed the lower court’s decision and the case was remanded to the lower court for a new trial and determination.

You can find the English translation of the decision here.

© 2008 Wonil Chung, a Korean Business Lawyer/Chung & Partners, a Korean Business Law Firm. All rights reserved. Some copyrights, photos, icons, trademarks, trade dress, or other commercial symbols that appear on this post are the property of the respective owners.