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A series of not-guilty court verdicts against companies punished or forced to compensate customers for price-fixing in other advanced economies are raising fears than the South Korean judiciary is letting the businesses off the hook for practices that have been called a “cancer on the market economy” - and could actually be encouraging them.

According to accounts on Apr. 5 from Fair Trade Commission (FTC) and court sources, the Supreme Court and High Courts have made a number of rulings exonerating truck companies on charges of collusion. In Dec. 2016, the Supreme Court ruled against the FTC in a collusion case against Volvo, Scania, Daimler, and MAN Truck & Bus.

“While the companies do appear to have exchanged price information, it cannot be concluded that the purpose was price-fixing, nor do the price increases at the different companies match,” the court said at the time.

On Mar. 10, Seoul High Court ruled against the FTC on the same grounds in a price-fixing case against Tata Daewoo. In 2013, the FTC fined seven truck companies (Volvo, Scania, Daimler, MAN, Tata Daewoo, Hyundai Motor, and Daewoo Songdo Development) a total of 116 billion won (US$102.7 million) and reported them to prosecutors on charges of collusion after discovering they had exchanged information on price hike plans and sales prices and used them as a basis for setting their prices.

The price-fixing by truck manufacturers is the same case that prompted the European Commission to assess a historic fine equivalent to 3.6 trillion won (US$3.2 billion) in July 2016. The five companies penalized by the European Union included the same ones - Volvo, Daimler, MAN, and Scania - punished by the FTC. The price-fixing periods also overlapped: 1997 to 2011 in the EU case, 2002 to 2011 as identified by the FTC. A double standard was further found in the truck manufacturers‘ response: accepting a lesser fine through leniency for voluntarily admitting the charges in the EU, while filing suit to dispute the charges in South Korea.

“The court rulings do not correspond with the way the law is enforced in advanced economies, and with acts of collusion becoming increasingly clearer, they have the effective result of letting the companies off the hook,” the FTC said on Apr. 5.

The European Commission views the exchanging of pricing information between companies as price-fixing, which is subject to penalties. In 2008, it punished three banana importers for exchanging price information and sharing opinions on price increases over the telephone every Thursday before the official announcement of standard prices the following week. The companies filed suit, objecting that they had merely exchanged information without agreeing on prices, but their case was thrown out by the European Court of Justice.

“The European Union is proactive on the issue, seeing even the exchanging of information as collusion, while the US is relatively circumspect but still regards information exchange as important circumstantial evidence of price-fixing,” explained Chung-Ang University law professor Cho Sung-kuk.

The FTC noted that Japan “also views it as tacit agreement and penalizes cases where there is indirect evidence such as information exchange, even if there is no explicit evidence of a price-fixing agreement.”

The FTC and experts are now mentioning the risk that the courts’ passive interpretation of the law could reduce the identification of price-fixing cases.

“There’s no point in going through all the trouble of proving and penalizing price-fixing if the court is just going to produce a not-guilty ruling. Meanwhile, the media attacks the FTC for going overboard in enforcing the law,” said an FTC official.

“As a result, the FTC is going to shy away from actively investigating and punishing even cases where customers suffer damages as a result of price-fixing,” the official said.

Seoul National University economics professor Yi Sang-seung said, “Because collusion takes place in secret, it is tough to find direct evidence of agreement.”

“So when evidence of information being exchanged behind closed doors and reflected in price hikes is discovered, it needs to be used as strong circumstantial evidence,” Yi said.

“In failing to take this fully into consideration, the courts could end up encouraging collusion and becoming an accessory to damages against consumers.”

By Kwack Jung-soo, business correspondent

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