When may a supplier lawfully maintain minimum resale prices, and when does restricting dealers' sales outlets harm fair trade? Decision 2010Du9976 on 'justifiable reason' and the restriction of trading partners

Question

Article 29(1) of the Monopoly Regulation and Fair Trade Act provides that a business operator must not engage in resale price maintenance, and its proviso makes an exception, where there is a 'justifiable reason', for maximum price maintenance, that is, preventing goods or services from being traded above a certain price. Article 23(1)(5) and (2) list, as a type of unfair trade practice, a transaction on conditions that unduly restrict the counterparty, and the decision quotes Article 2(6) of the Act as defining resale price maintenance as setting a price and forcing a counterparty business operator, or a business operator at a later trading stage, to sell or supply at that price, or attaching rules or other binding conditions to the transaction for that purpose. The questions are how a 'justifiable reason' is judged and who must prove it, and what a restriction of a counterparty's trading area or trading partners requires.

Decision 2010Du9976 raises both questions in a dispute over the Fair Trade Commission's orders against Korea Callaway Golf Ltd., an importer and seller of golf goods. The Commission treated the company's pressure on about 450 dealers to hold minimum prices as resale price maintenance and its ban on dealers selling to other outlets without prior written consent as a transaction that unduly restricts trading partners; the Seoul High Court upheld the orders, and the Supreme Court set its judgment aside.

Material to check

The statutes are Articles 2(6), 23(1)(5) and (2), and 29(1) of the Monopoly Regulation and Fair Trade Act, in the wording the decision quotes, and Article 36(1), [Table 1], Item 7(b) of the Enforcement Decree of that Act as it stood before its amendment by Presidential Decree No. 22160 of 14 May 2010, which the decision cites without reproducing. The current texts of Articles 23 and 29 of the Act, as published at the time of writing, deal respectively with restrictions on voting rights in circular shareholdings and with board resolutions and disclosure by public-interest foundations that are related parties of the person controlling a business group subject to disclosure; the decision applied the articles under the numbering then in force and quotes their wording at that time.

The decision cites Decision 2009Du9543 (25 November 2010), which held that minimum resale price maintenance, though it appears to restrict competition within a brand, may exceptionally be permitted where the concrete market situation shows it promotes inter-brand competition and so increases consumer welfare. The decision states the same criteria, places the burden of proof on the business operator, and cites that precedent as the source of the rule.

Possible readings

Read with Decision 2009Du9543, the proviso to Article 29(1) means that even minimum resale price maintenance, not only maximum price maintenance, can exceptionally be lawful where there is a justifiable reason. The decision grounds this in the purpose of the Act, which is to promote competition and increase consumer welfare, and in the aim of the ban on resale price maintenance, which is to stop a business operator from fixing prices in advance and thereby restricting price competition at the distribution stage to the detriment of consumers. Whether a justifiable reason exists turns on a comprehensive view of whether inter-brand competition in the relevant market is active, whether the conduct promotes non-price service competition among distributors for consumers, whether consumers' product choices are diversified, and whether new entrants can secure distribution networks and enter the relevant product market easily. Read together, the two decisions place the burden of proving that reason on the business operator.

On the restriction of trading partners, the decision reads Article 23(1)(5) and (2) with the former Enforcement Decree provision as covering a transaction in which a business operator unduly restrains its counterparty's trading area or trading partners by a condition of dealing, where the conduct is liable to hinder fair trade. Whether it is liable to do so is judged comprehensively from the conduct's intent and purpose, its effects and influence, the form of the transaction, the nature of the goods or services, the market situation, the positions of the business operator and the counterparty in the market, the content and degree of the restriction, its impact on competition, and whether it is used together with, or as a means of, other conduct pursuing an unlawful purpose under the Act.

A third reading follows from the decision's treatment of the Fair Trade Commission's Unfair Trade Practices Review Guidelines. Those Guidelines place a business operator whose market share is below 10% in a safe harbour that is in principle exempt from review, but they also provide that review may still be opened. The decision therefore holds that a case within the safe harbour is not automatically exempt: the comprehensive assessment must still be made.

What the decisions held

Decision 2010Du9976 set aside the judgment of the Seoul High Court of 21 April 2010 (2009Nu5482) and remanded the case to that court. The court below had found that from January 2005 the plaintiff distributed to about 450 dealers price lists showing the wholesale and recommended consumer prices of its golf clubs, while its sales staff notified minimum sale prices orally, and that it enforced those prices through periodic price checks, warnings, restoration of prices, and suspension or termination of dealings, thereby harming free competition among the dealers. It then held that the conduct was unlawful once the elements of Article 2(6) were met, and dismissed, without examining it further, the plaintiff's claim that the conduct protected dealers that had strengthened their non-price competitiveness in promotion, product explanation and warranty repair, and promoted inter-brand competition and so increased consumer welfare.

The Supreme Court held that, because minimum resale price maintenance is exceptionally allowed where a justifiable reason exists and the burden of proving it is on the business operator, the court below should at least have given the plaintiff an opportunity to prove the justifiable reason it asserted; by not doing so, it misunderstood the law on justifiable reason and failed to complete its inquiry, in a way that affected the judgment. On the restriction of trading partners, the court below had found that the contract barred dealers from selling goods to other outlets without the plaintiff's prior written consent and allowed the plaintiff to suspend supply and terminate the contract on breach, and that its ultimate purpose was to maintain price control by keeping goods from reaching non-dealers, so that the restriction served as a means of resale price maintenance. The Supreme Court held that whether the restriction was liable to hinder fair trade had to be judged by also considering whether the resale price maintenance it served was lawful for a justifiable reason and whether the restriction itself had competition-promoting effects. The court below had instead declared the resale price maintenance unlawful without examining whether there was a justifiable reason, and then held the restriction unlawful as a means of that conduct; in doing so it misunderstood the law on when a restriction of trading partners hinders fair trade and failed to complete its inquiry. The Supreme Court did, however, reject the plaintiff's argument that it should be exempt from review because its market share was below 10% and so fell within the safe harbour of the Commission's Guidelines.

Points left open

The decision does not decide whether the plaintiff's minimum resale price maintenance had a justifiable reason: it states the criteria and the burden of proof and leaves the proof and the finding to the court on remand. How the four criteria weigh against one another, and which way the scale tips in the golf goods market, is unsettled by the decision.

The decision also leaves open how the interplay between the resale price maintenance and the restriction of trading partners is to be assessed where the price maintenance is found lawful. The decision says only that the two questions are to be judged together and that the competition-promoting effects of the restriction itself are to be taken into account; it does not say what result follows in any given combination, or how much weight the safe harbour carries once review is opened.

When to reconsider

We will revisit this brief if the judgment on remand decides the justifiable reason question for these parties, if a later Supreme Court decision states how the four criteria and the safe harbour of the Commission's Guidelines are to be applied, or if Articles 23 and 29 of the Act or the Enforcement Decree provisions are renumbered or amended again.

Statutes referred to

• 독점규제 및 공정거래에 관한 법률 제29조, 제23조
• 구 독점규제 및 공정거래에 관한 법률 시행령 제36조

Decisions referred to

• 대법원 2011. 3. 10. 선고 2010두9976 판결 · Decision ledger
• 대법원 2010. 11. 25. 선고 2009두9543 판결 · Decision ledger

Verification status

The sources were read at the National Law Information Center on 24 October 2026: for the decision, its published headnotes, summary and full text; for the Act, the current text of Articles 23 and 29 as published; and for Decision 2009Du9543, its published headnotes and summary. The former text of the Enforcement Decree provision could not be retrieved, so the provision is named only as the decision cites it.