Seven Companies Face Up to 1.16 Trillion Won Surcharge for Market Share Abuse
The Korea Fair Trade Commission (KFTC) announced on the 20th that seven flour milling companies, including CJ CheilJedang, violated the Fair Trade Act by colluding on flour prices and supply volumes. It decided to issue a price re-determination order. This is the first time the KFTC has issued such an order in 20 years. The companies cited for collusion are CJ CheilJedang, Daesun Flour Mills, Daehan Flour Mills, Sajo Dongaone, Samyang Corporation, Samhwa Flour Mills, and Hantap. The commission estimated that these companies generated 5.8 trillion Korean won in sales through the collusion. Consequently, the maximum surcharge the KFTC can impose is 1.16 trillion Korean won.
◇ President Lee Jae Myung criticizes collusion as “cancerous,” KFTC holds unusual briefing
The commission sent review reports to the seven companies the previous day, applying charges of violating Article 40, Paragraph 1, Item 1 (prohibiting price collusion) and Item 3 (prohibiting supply volume allocation) of the Fair Trade Act. A review report is a document detailing the commission’s findings on illegality and proposed measures, including surcharges, and is similar to a prosecutor’s indictment.
Previously, the commission did not disclose to the media when sending review reports, as they are interim results, with final decisions made by commissioners during plenary meetings after the reports are sent. However, this time, the commission unusually distributed press releases and held a briefing for journalists.
Yoo Seong-wook, head of the KFTC’s investigation management division, stated, “In cases deemed necessary to inform the public from a public interest perspective, we plan to disclose the sending of review reports within the scope of not infringing on the defendants’ (the seven companies’) right to defense.”
This follows President Lee Jae Myung’s criticism of collusion as a “cancerous existence” during a senior secretaries’ meeting at Cheong Wa Dae the previous day. The government aims to actively publicize collusion allegations and heighten market vigilance.
◇ Price re-determination order issued after 20 years… Surcharge up to 1.16 trillion Korean won possible
According to the commission, the seven companies colluded to fix and raise flour prices while arbitrarily allocating supply volumes to major buyers, including instant noodle and bakery companies. The collusion period spanned from November 2019 to October 2025. Given that these companies hold an 88% market share in the B2B sector, the commission views this collusion as a grave violation.
Consequently, a price re-determination order — where the government mandates price reductions — was issued for the first time in 20 years. In 2006, the KFTC issued such an order to eight flour milling companies for price collusion, leading to approximately a 5% price reduction.
Surcharges for collusion can reach up to 20% of related sales. Considering the 6 trillion Korean won in related sales for this case, the commission could impose surcharges up to 1.16 trillion Korean won. However, the commission did not disclose the surcharge amounts imposed, which will be revealed after the upcoming plenary meeting.
Meanwhile, the seven companies can exercise their right to defense by submitting written opinions within eight weeks of receiving the review reports. The KFTC plans to hold the plenary meeting as swiftly as possible to finalize its decision.
