Unfair Support, Resale Price Maintenance and the Illegality of Large-Scale Promotional Support: Three Supreme Court Judgments under the Monopoly Regulation and Fair Trade Act

Question

Three judgments are analysed on three topics. The first is unfair support to specially related persons and affiliates, together with the determination of the normal price where a transaction stage is added. The second is the review of justifiable grounds for minimum resale price maintenance. The third is the comprehensive illegality of large-scale promotional support and resale price fixing, and the standards for calculating the surcharge.

The first issue is the question addressed in 2019Do19067: "How is it determined whether conduct constitutes unfair support through assets or goods, or the addition of a transaction stage, and how is the normal price to be set?" The second issue is the question addressed in 2010Du9976: "Was there a justifiable ground for the conduct of a golf equipment company that imposed minimum selling prices on approximately 450 dealers and restricted their sales outlets?"

The third issue is the question addressed in 2008Du22815: "Do large-scale promotions, including cash-equivalent support of KRW 86.482 billion, and the fixing of a resale price of KRW 330 per bottle violate the Monopoly Regulation and Fair Trade Act?" All three judgments ask how, on the record, the boundaries of the statutory text and the substantive factors for decision are to be determined.

Material to check

First (2019Do19067), this decision addresses the method of determination for unfair support of assets, goods, etc. and unfair addition of transaction stages and the meaning of the normal price, the application of statutes to a single comprehensive offense spanning before and after the amendment of the Act, and the requirements for falling under other obstruction of business activities together with the method of determining unfairness. To ascertain whether conduct constitutes support, examine the materials relating to transactions that show the difference between performance and counter-performance, the scale of supportive transactions, the economic benefits arising from the support, the period, number of times, and timing of the support, and the economic circumstances in which the recipient of the support was placed at the time of the support. To fix the normal price, examine materials with which the transaction price that would have been formed between independent parties with no special relationship in circumstances of similar timing, type, scale, period, credit standing, and the like can be ascertained, and, where obstruction of business activities is at issue, examine together the materials showing the position in the market and the means of obstruction, the intent and purpose, the content of the provisions of statutes and regulations, the characteristics of the market, transaction practices, and the results of the obstruction.

Second (2010Du9976), this decision addresses, through the golf goods dealership case, the criteria for determining a justifiable reason and the burden of proof in resale price maintenance, and the meaning of restrictions on transaction areas or transaction counterparties together with the criteria for determining whether there is a risk of impeding fair trade. To ascertain whether there is a justifiable reason, examine the materials showing whether competition between brands is invigorated in the relevant market, whether the service competition of distributors is promoted, whether the choices of goods available to consumers are diversified, and whether new entrants can readily secure distribution networks and enter the market. Where restrictions on transaction counterparties are at issue, examine the intent and purpose of the conduct, the effect and impact, and the content and degree of the restriction through the price lists distributed to the dealerships, the dealership agreements, the provisions stipulating disadvantages upon price violations such as suspension of transactions or discontinuation of supply, and the records of actual enforcement.

Third (2008Du22815), this decision addresses whether sales promotion support to medical institutions and others constitutes a single comprehensive unfair act of customer inducement, the scope of the amount of sales of the relevant goods for the calculation of a surcharge, the criteria for determining the exceptional permissibility of minimum resale price maintenance and the burden of proof, and the application thereof in the Bacchus-type products case. Where sales promotion support is at issue, examine, through the materials relating to the sales promotion plan stipulating various kinds of support such as cash or goods support and case study support and the records of its implementation, whether unfair or excessive benefits were provided in light of normal transaction practices and whether there is a possibility of attracting the customers of competing businesses. To ascertain the scope of the surcharge, examine the materials showing the scope of the target of the sales promotion plan and the distribution of the target medical institutions and the like, together with the materials on the total sales of all trading partners of the pharmaceutical in question, and, where the designation of a resale price is at issue, examine the provisions on the designation of the resale price and on termination of contract upon violation in the sales agreements with wholesalers.

Possible readings

The issues in 2019Do19067 were threefold. The first was whether the conduct constituted support, including whether it was on a substantial or considerable scale, and how the normal price is to be determined. The second was which law applies to a single comprehensive offence spanning the periods before and after a statutory amendment. The third was the requirements for other interference with business activities and how its unfairness is to be assessed.

The issues in 2010Du9976 were the justifiable grounds for minimum resale price maintenance and the burden of proving them, whether the restriction of trading areas or trading counterparties tended to impede fair trade, and whether the conduct qualified for the safe-harbour exemption from review.

The issues in 2008Du22815 were whether several acts of support constituted a single comprehensive act of unfair inducement of customers, whether the calculation of the surcharge was lawful (including the turnover of the relevant goods, the violation period and the base imposition rate), and whether there was a justifiable ground for the minimum resale price maintenance.

What the decisions held

Supreme Court Decision 2019Do19067 decided September 16, 2022 held as follows: "Whether, under the former Monopoly Regulation and Fair Trade Act, in unfair support of assets, goods, etc., a party 'provided or transacted at a conspicuously low or high consideration, or provided or transacted on a conspicuous scale, thereby providing excessive economic benefits'; whether, under the amended Monopoly Regulation and Fair Trade Act, in unfair support of assets, goods, etc., a party 'provided or transacted at a considerably low or high consideration, or provided or transacted on a considerable scale, thereby providing excessive economic benefits'; or whether, in unfair addition of transaction stages and the like, a party 'provided excessive economic benefits by adding specially related persons or other companies to the transaction stages, or routing transactions through them, despite the fact that it would be considerably advantageous to directly transact goods or services with other businesses,' must be determined concretely and individually, in comprehensive consideration of the difference between performance and counter-performance, the scale of supportive transactions, the economic benefits arising from the support, the period of support, the number of times of support, the timing of support, the economic circumstances in which the recipient of the support was placed at the time of the support, and the like." Through this decision, the Supreme Court held that whether conduct falls under unfair support or unfair addition of transaction stages must be determined concretely and individually, in comprehensive consideration of the difference between performance and counter-performance, the scale of supportive transactions, the economic benefits, the period of support, and the like. It held that the normal price serving as the criterion means the transaction price that would have been formed between independent parties with no special relationship, and the like.

Supreme Court Decision 2010Du9976 decided March 10, 2011 held as follows: "The purpose of the Monopoly Regulation and Fair Trade Act is to promote competition and thereby enhance consumer welfare, and the purport of Article 29 (1) of the Act in prohibiting resale price maintenance is to prevent harm to consumer welfare by restricting price competition at the distribution stage through a business predetermining transaction prices for goods or services and transacting accordingly." Through this decision, the Supreme Court holds that the Act takes the promotion of competition and the enhancement of consumer welfare as its purpose, and that the meaning of former Article 29 (1) lies in preventing restrictions on price competition at the distribution stage. Even where competition within the relevant brand appears restricted, it is exceptionally permitted if there is a justifiable reason, such as invigorating competition between brands and thereby increasing consumer welfare. Whether a justifiable reason exists must be judged by gathering the degree of invigoration of competition between brands, whether competition in services other than price is promoted, whether the choices of goods available to consumers are diversified, whether new entrants can secure distribution networks and enter with ease, and the like, and the burden of proof is borne by the business. Whether restrictions on transaction counterparties carry a risk of impeding fair trade is judged by gathering the meaning and purpose of the conduct, the effect and impact, the characteristics of the goods and the market circumstances, and the position and the content and degree of the restriction. The impact on competition and whether means of unlawful purpose were used are also examined, and the lawfulness of the resale price maintenance and its competition-promoting effect are looked at together.

Supreme Court Decision 2008Du22815 decided December 23, 2010 held as follows: "And whether there is such a justifiable reason must be determined in comprehensive consideration of whether competition between brands is invigorated in the relevant market, whether the service competition of distributors is promoted by that conduct, whether the choices of goods available to consumers are diversified, whether new entrants are enabled to readily secure distribution networks and thereby easily enter the relevant goods market, and the like; and, in light of the purport of the relevant provision, the burden of proof regarding this must be deemed to rest on the business." Through this decision, the Supreme Court affirmed the appellate court's decision treating the individual acts of support implemented in accordance with the head office's sales promotion plan as a single comprehensive unfair act of customer inducement under former Article 23 (1), subparagraph 3 of the Monopoly Regulation and Fair Trade Act. Each individual support falls under the unfair or excessive benefit under former Article 36 (1) and [Table 1], subparagraph 4, item (a) of the Enforcement Decree, and, given the prescription structure, there is a possibility of attracting the customers of competing businesses. Because the confirmed acts of providing benefits constitute the implementation of a sales promotion plan at the head office level toward the general body of trading partners, the relevant amount of sales is not limited to the sales of specified counterparties but is taken as the total sales of all trading partners of the pharmaceutical in question. The designation of 330 won per bottle for Bacchus-type products constitutes minimum resale price maintenance under former Article 29 (1) of the Act, the burden of proving a justifiable reason rests on the business, and there are no materials to recognize such a reason.

Practical checklist

First, how is it determined whether conduct constitutes unfair support of assets, goods, etc. and unfair addition of transaction stages, and what is fixed as the normal price? Check whether the Records were compared and comprehensively considered against the materials showing the difference between performance and counter-performance, the scale of supportive transactions, the economic benefits arising from the support, the period, number of times, and timing of the support, and the economic circumstances in which the recipient of the support was placed at the time of the support, and the materials on transaction prices in circumstances of similar timing, type, scale, period, credit standing, and the like.

Second, did the conduct of a golf goods company, which compelled minimum selling prices on approximately 450 dealerships and restricted sales outlets, have a justifiable reason? Check whether a justifiable reason exists and whether there is a risk of impeding fair trade by comparing, in the Records, the materials showing whether competition between brands is invigorated in the relevant market, whether the service competition of distributors is promoted, whether the choices of goods available to consumers are diversified, and whether new entrants can readily secure distribution networks and enter the market, with the price lists and the contents of the dealership agreements, and the intent and purpose of the conduct, the effect and impact, and the content and degree of the restriction.

Third, do large-scale sales promotions, including cash-equivalent support of 86.482 billion won, and the designation of a resale price of 330 won per bottle constitute violations of the Monopoly Regulation and Fair Trade Act? Check whether, in the Records, through the sales promotion plan and the records of implementation of cash or goods support, case study support, and the like, the provision of unfair or excessive benefits in light of normal transaction practices and the possibility of attracting the customers of competing businesses are examined, and, by comparing the materials on the scope of the target of the sales promotion plan, the distribution of medical institutions, and the total sales of all trading partners with the contents of the designation of the resale price stipulated in the sales agreements with wholesalers, whether a single comprehensive unfair act of customer inducement, the scope of the relevant amount of sales, and a justifiable reason are verified.

Glossary

The normal price in unfair support and the method of comprehensive determination (2019Do19067): The Supreme Court held that whether conduct falls under unfair support or unfair addition of transaction stages must be determined concretely and individually, in comprehensive consideration of the difference between performance and counter-performance, the scale of supportive transactions, the economic benefits, the period of support, and the like. It held that the normal price serving as the criterion means the transaction price that would have been formed between independent parties with no special relationship, and the like. As decision factors, the difference between performance and counter-performance, the scale of supportive transactions, the period of support, and the like are presented.

The order of inquiring into a justifiable reason in a case where minimum resale price maintenance and restrictions on transaction counterparties were at issue together (2010Du9976): The Supreme Court holds that the Act takes the promotion of competition and the enhancement of consumer welfare as its purpose, and that the meaning of former Article 29 (1) lies in preventing restrictions on price competition at the distribution stage. Even where competition within the relevant brand appears restricted, it is exceptionally permitted if there is a justifiable reason, such as invigorating competition between brands and thereby increasing consumer welfare. Whether a justifiable reason exists must be judged by gathering the degree of invigoration of competition between brands, whether competition in services other than price is promoted, whether the choices of goods available to consumers are diversified, whether new entrants can secure distribution networks and enter with ease, and the like, and the burden of proof is borne by the business. Whether restrictions on transaction counterparties carry a risk of impeding fair trade is judged by gathering the meaning and purpose of the conduct, the effect and impact, the characteristics of the goods and the market circumstances, and the position and the content and degree of the restriction. The impact on competition and whether means of unlawful purpose were used are also examined, and the lawfulness of the resale price maintenance and its competition-promoting effect are looked at together. As decision factors, whether competition between brands is invigorated, whether service competition is promoted, whether the choices of goods available to consumers are diversified, and the like are presented.

The criteria for reviewing large-scale sales promotion support and the designation of resale prices as a comprehensive violation and by the standard of the relevant amount of sales (2008Du22815): The Supreme Court affirmed the appellate court's decision treating the individual acts of support implemented in accordance with the head office's sales promotion plan as a single comprehensive unfair act of customer inducement under former Article 23 (1), subparagraph 3 of the Monopoly Regulation and Fair Trade Act. Each individual support falls under the unfair or excessive benefit under former Article 36 (1) and [Table 1], subparagraph 4, item (a) of the Enforcement Decree, and, given the prescription structure, there is a possibility of attracting the customers of competing businesses. Because the confirmed acts of providing benefits constitute the implementation of a sales promotion plan at the head office level toward the general body of trading partners, the relevant amount of sales is not limited to the sales of specified counterparties but is taken as the total sales of all trading partners of the pharmaceutical in question. The designation of 330 won per bottle for Bacchus-type products constitutes minimum resale price maintenance under former Article 29 (1) of the Act, the burden of proving a justifiable reason rests on the business, and there are no materials to recognize such a reason. As decision factors, the scope of the target of the sales promotion plan, the distribution of the target medical institutions, whether competition between brands is invigorated, and the like are presented.

Sources and limitations

This white paper was prepared solely on the basis of the original texts of Articles 2, 45 (1), 46, 47, and 50 of the Monopoly Regulation and Fair Trade Act made public on the National Law Information Center and the judgment texts of Supreme Court Decision 2019Do19067 decided September 16, 2022, Supreme Court Decision 2010Du9976 decided March 10, 2011, and Supreme Court Decision 2008Du22815 decided December 23, 2010.

This is an academic research material organizing general legal principles and standards for record review, and is not legal advice on an individual case or an opinion submitted to a court.

Points left open

2019Do19067: How is the new Act's provision on the addition of transaction stages applied after the period of application of the supplementary provision on continuing transactions has elapsed?

2010Du9976: Where a restriction on sales outlets for price control at the same time has the effect of promoting competition, how far does the risk of impeding fair trade extend?

2008Du22815: How far does the assessment of conduct as the implementation of the head office's sales promotion plan justify a comprehensive single violation and the calculation of the total amount of sales?

When to reconsider

2019Do19067: This needs to be read again if Article 23 of the Monopoly Regulation and Fair Trade Act is amended or an en banc judgment on the same issue is rendered.

2010Du9976: This is to be reviewed again if the business produces materials proving a justifiable reason and contests the state of competition between brands.

2008Du22815: The comprehensive assessment and the scope of the amount of sales are to be reviewed again if the sales promotion plan is confirmed not to target the general body of trading partners, or if the acts of support are confirmed to be structured as individually disconnected.

Statutes referred to

• 독점규제 및 공정거래에 관한 법률 제2조, 제45조 제1항, 제46조, 제47조, 제50조

Decisions referred to

• 대법원 2022. 9. 16. 선고 2019도19067 판결 · Decision ledger
• 대법원 2011. 3. 10. 선고 2010두9976 판결 · Decision ledger
• 대법원 2010. 12. 23. 선고 2008두22815 판결 · Decision ledger

Verification status

The cited provisions (Articles 2, 45 (1), 46, 47, and 50 of the Monopoly Regulation and Fair Trade Act) and the decisions addressed (Supreme Court Decision 2019Do19067 decided September 16, 2022, Supreme Court Decision 2010Du9976 decided March 10, 2011, and Supreme Court Decision 2008Du22815 decided December 23, 2010) were checked against the current statutes on the National Law Information Center and the original texts of the Supreme Court decisions as of 2026-10-15. This white paper cites only the three decisions listed under the decisions addressed.