Information Exchange Between Cartel Participants
in Atypical Cartels
Hwan Jeong
Partner
0
LEE & KO
0
A.
Information Exchange under Korean Competition Law
B.
y
Comparative Analysis
C.
Korean Cases Relating to Information Exchange
D.
1.
Noodle Cartel Case
2.
Flour Cartel Case
3.
Life Insurance Cartel Case
Implications & Lessons
1
1
1
2
A. Information Exchange
g
Under Korean Competition Law
2
A. Information Exchange Under Korean Competition Law
1. Cartel
price,
enterprises
unreasonable,
anti-competitive
output,
customer,
agreement
territory
allocation, etc.
 Korean competition law generally prohibits any “agreement” between competitors to
engage in collusive activity that unreasonably restricts competition.
3
2
A. Information Exchange Under Korean Competition Law
 Agreement
 “contract, arrangement, resolution or any other means”

any other means: meeting of minds through trade association meeting, phone call, email
correspondence, etc.
 Meeting of Minds regarding Coordinated Behavior
 Explicit / Tacit
 Difficult to differentiate between conscious p
parallelism and tacit collusion in
oligopoly markets
4
A. Information Exchange Under Korean Competition Law
2. Presumption of “Agreement”

Article 19.5 of the Monopoly Regulations and Fair Trade Act (“MRFTA”): If there is
significant probability that enterprises collusively determined price, output, other
transaction terms, etc., agreement among such enterprises will be presumed even in the
absence of explicit agreement.

(i) Coordinated or Parallel Behavior + (ii) Significant Probability = Presumption of
Agreement: Shifts the burden of proof from the KFTC to the defendant  the
enterprises must prove that agreement does not exist

Similar function as EU’s concept of “concerted practice”
5
3
A. Information Exchange Under Korean Competition Law
3.
KFTC Guidelines for Cartel Review

While an agreement to exchange price information is not in itself illegal, evidence of exchanges
of information on price, production volume and market share between competitors has
frequently served as proof,
proof or a presumption,
presumption of collusion
collusion.

According to the Guidelines for Cartel Review of the KFTC, the following may be used as
circumstantial evidence for strengthening the presumption of agreement.
Evidence on Direct or Indirect Communication or Information Exchange
g
<Example 1> Identical memoranda of companies on price hikes, output reduction, etc.
<Example 2> Coordinated behavior resulting from a meeting or other communication
<Example 3> The sharing of or an agreement to share information on prices or output, etc.
6
A. Information Exchange Under Korean Competition Law
4.
Information Exchange
 While information exchange is not illegal per se, it may serve as critical
circumstantial evidence in proving the existence of tacit agreement
 Determination of illegality will be affected by various factors such as content
of the shared information (level of detail, novelty, individualized, etc.) and
frequency of the information exchange
 Reoccurring exchanges of competitively sensitive information among
competitors may serve as strong circumstantial evidence of tacit collusion
 Information exchanges are reviewed on a case-by-case basis.
7
4
A. Information Exchange Under Korean Competition Law
5. Korean Court Ruling regarding Information Exchange
Dairy Cartel Case, Seoul High Court Decision, 2012
Although collusion may not be conclusively found based merely on the fact of information
“Although
exchange among competitors, the exchange of pricing and production information among
competitors may be used as a means of facilitating collusion through increased transparency in
the market which allows observation of, and response to, competitors’ strategies. In this regard,
such information exchange may serve as strong circumstantial evidence of collusion depending
on factors such as the structure and characteristics of the relevant market, subject of the
information, nature of the information, timing and method of information exchange, identity
of parties exchanging information.”
①
M k t St
Market
Structure
t
and
d Ch
Characteristics:
t i ti
F th increasing
Further
i
i
transparency
t
in
i markets
k t with
ith
comparatively high concentration (e.g., oligopoly market) or markets with product
homogeneity in terms of specification, quality, etc.
②
Information Subject: Information exchanged is not statistical, but information generally
deemed as confidential and competitively sensitive (e.g., price increase plans or records).
8
A. Information Exchange Under Korean Competition Law
③
Timing and Method of Information Exchange: Information exchange occurs prior to
competitors’ determination of price increase or prior to price increase information being made
public; regular, frequent and/or continuous information exchange
④
Party Exchanging Information: Information exchange occurs secretly among competitors;
information exchange occurs among employees/officers who may affect pricing decisions

These information exchanges can serve as strong circumstantial evidence of
collusion
9
5
10
I.
B. Comparative Analysis
10
B. Comparative Analysis (Korea vs. US)
1. Rule of Reason Approach
KOREA
•
•
Information exchange in itself is not
regarded as unlawful, and the mere
fact that companies agree to share
information does not constitute anticompetitive coordination
Information exchange among
competitors must be judged on a
case-by-case basis because it has
b th pro-competitive
both
titi and
d antiti
competitive effects
U.S.
•
In applying Section 1 of the Sherman
Act, rule of reason approach is applied
•
Balances the information exchanges’
anti-competitive effects with their
potential pro-competitive benefits (e.g.
efficiency and product quality
improvements)
11
6
B. Comparative Analysis (Korea vs. US)
2. The Evidentiary Value of Information Exchanges
KOREA
•
•
U.S.
“Guidelines for Cartel Review”
provides that an exchange of or
agreement to exchange price or
output data can be used as
circumstantial evidence on the
existence of an agreement.
Court has ruled that “information
exchange among competitors may
serve as strong circumstantial
evidence based on the
structure/characteristics of the
relevant market, subject of information,
type and nature of information,.. etc.”
•
Information exchanges can be treated
as circumstantial evidence of an
unlawful price fixing or market
allocation agreement
•
Court explained that “Information
exchanges help to establish an
antitrust violation only when either (1)
the exchange indicates the existence
of an express or tacit agreement to fix
or stabilize prices, or (2) the exchange
is made pursuant to an express or
tacit agreement that is itself a violation
of § 1 under a rule of reason analysis.”
12
B. Comparative Analysis (Korea vs. US)
3. Plus Factors
KOREA
•
Illegal collusion will not be found
based merely on the existence of
information exchange among
competitors
•
The importance of the exchanged
information must be determined by
reviewing the type and content of the
information,etc.,
•
(ⅰ) whether the exchanged information
was reflected in pricing decision
making process, or (ⅱ) the information
exchange was a result of the existing
agreement, etc.  if there are plus
factors supporting the existence of
agreement, then a tacit agreement will
be found.
U.S.
•
The DOJ can make a finding that
information exchange is anti
anticompetitive even though there is no
direct evidence of a hard-core cartel
on the basis of conscious parallel
behavior which is accompanied by
circumstantial evidence and “plus
factors” such as certain facilitating
practices
 plus factors: price parallelism, product
uniformity, exchange of price
information, etc.
13
7
B. Comparative Analysis (Korea vs. US)
4. Criteria considered in assessing the Legitimacy of Information Exchanges
KOREA
•
Almost identical to the
U.S.
U.S.
① The nature and quantity of the information
 extensive exchange of information regarding pricing, output,
major costs, marketing strategies and new product
development is more likely to have anti-competitive
implications
② How recent the shared data is
 sharing of past data is generally deemed less problematic
than sharing current data
③ The parties’ intent in sharing the information
 an anti-competitive intent, such as an intent to stabilize
prices, is problematic
14
B. Comparative Analysis (Korea vs. US)
4. Criteria considered in assessing the Legitimacy of Information Exchanges
KOREA
•
Almost identical to the
U.S.
U.S.
⑤ Public availability of information
 where information is already publicly available, the risk of its
exchange between competitors seems low
⑥ How the exchange is structured and controlled
 a direct exchange is more likely to be anti-competitive than
an exchange through an intermediary
⑦ The frequency of exchanges
 the more frequent the exchange, the more problematic it
may be
15
8
16
I.
C. Korean Cases relating to Information Exchange
1.
Noodle Cartel Case
2.
Flour Cartel Case
3.
Life Insurance Cartel Case
16
C. Korean Cases relating to Information Exchange
1. Noodle Cartel Case
 Facts
 Characteristics of Noodle Market
Nongshim
N
hi
70%
Samyang
, Ottogi,
Yakult
30%

4 Companies make up 100% of the market  oligopoly market

Nongshim has 70% market share and remaining 3 companies (Samyang, Ottogi, Yukult) have 30%
market share
 Parallel Noodle Price Increases


6 incidents of parallel price increase during the period from May 2001 to February 2010
Although there was explicit agreement for the 1st price increase in 2001, the 2nd to 6th price
increases only involved information exchanges among the 4 companies without any explicit
agreement
17
9
C. Korean Cases relating to Information Exchange
1. Noodle Cartel Case
<Parallel Price Increases of the 4 Noodle Companies>
KRW 750
08.
Feb
KRW 650
07.
Mar
08.
Mar
08.
Apr
07. 07. 07.
Apr Sep Apr
KRW 600
04.
Dec
KRW 550
03.
Dec
KRW 520
01.
May
01.
Jun
01.
Jul
1st Increase
Nongshim
Ottogi
04. 04. 04.
Feb Feb Apr
03
02 02
02.
02. 03.
Nov Dec Jan
02
02.
Oct
KRW 480
05. 05. 05.
Mar Apr Feb
2nd Increase
3rd Increase
4th Increase
5th Increase
6th Increase
Samyang
Yakult
18
C. Korean Cases relating to Information Exchange
1. Noodle Cartel Case
 Price Information Exchange

Nongshim first prepared a price increase plan and informed the other companies of such plan via
e-mail, the other companies made similar or identical price increases, price increase information
was shared among the companies and each company reflected the information in their respective
pricing scheme.

Exchanged information consisted of price increase plan, price increase record, production and
supply date of products subject to price increase on and after the price increase
 Competitively Sensitive Information Exchange

Frequent and regular exchange (monthly meetings, weekly mails, phone calls, etc.) through
phone call, email and meetings of competitively sensitive information such as sales
performance/target data, sales support plans for distributors, marketing/promotion plans , etc.

Annual Noodle Conference was used as a communication channel among competitors
19
10
C. Korean Cases relating to Information Exchange
1. Noodle Cartel Case
 KFTC Determination (2012)

Tacit cartel through continuous, frequent/regular and structured information exchange in an
oligopoly
li
l market
k

Administrative fines of KRW 135.4 billion (approximately USD 135 million)
 Court Decision (2012)

An agreement on illegal collusion cannot be found based merely on the fact that there exchange of
pricing information among competitors

(ⅰ) the importance of the exchanged information must be determined by comprehensively
reviewing the type and content of the information, timing and method of the exchange, party
exchanging the information, etc., (ii) and if there are various additional plus factors supporting the
existence of an agreement, such as the reflection of exchanged information in the decision of
parties through matching of prices or a continuation of the performance of an existing agreement,
then a tacit agreement may be found.
20
C. Korean Cases relating to Information Exchange
1. Noodle Cartel Case
 Court Decision (2012)

In this case:
①
Core pricing information
f
such as price increase plans and records were continuously exchanged
②
The 2nd through 6th price increases were a continued performance of the agreement on the 1st price
increase
③
The increased price of the products were identical
 There was a “tacit agreement” to set the increased prices for the 2nd through 6th price increases to
similar or identical level through information exchanges
 Therefore, the series of agreements established for the 1st through 6th price increases
comprehensively form a single and continuous illegal collusion
Tacit Agreement was found based on the existence of plus factors in addition
to the fact of information exchange among competitors.
21
11
C. Korean Cases relating to Information Exchange
2. Flour Cartel Case
 Facts
 Characteristics of Flour Market

Top 3
Companies
75%
Top 3 companies comprise 75% ⇒ oligopoly market
Other
25%
Agreement on output and price


8 domestic flour manufacturers agreed on output and price through sales executive meetings and sales
division head meetings which were convened 1~2 times per month beginning January 2000

Allocation of output + 5 incidents of price increase
Meeting Type
Meeting Venue
Meeting Frequency
Main Discussion
Representative
Meeting
Restaurant,
Association Meeting Room
Irregular
Agreement on output allocation ratio
Sales Executive
Meeting
Restaurant
2ndd and 4thh Tuesdays of
each month
Agreement on total annual output
Agreement on overall price increase
Sales Division
Head Meeting
Restaurant
2nd and 4th Tuesdays of
each month
Agreement on monthly output per company
Agreement on specific timing of price increase and
product type subject to price increase
Information Exchange


The companies exchanged information on flour price, sales and production quantity  based on such
exchanged information verified compliance with agreements
22
C. Korean Cases relating to Information Exchange
2. Flour Cartel Case
 KFTC Determination(2006)

There was explicit agreement among the 8 companies regarding total domestic output volume, per
company output volume,
l
pricing
i i
and
d transaction
i
terms off major
j fl
flour products
d

Verification of agreement compliance was made through information exchanged at meetings

Increasing flour prices and controlling output (sales volume) by Companies collectively comprising
99% of the market share is illegal collusion

Prohibition order on information exchange and administrative fines totaling KRW 43.4 billion
(approximately USD 43 million)
23
12
C. Korean Cases relating to Information Exchange
2. Flour Cartel Case
 Seoul High Court Decision (2007)

Found illegal collusion
①
The purpose off information
f
exchange was to facilitate
f
cartel activity
②
Domestic flour market is an oligopoly market
③
The exchanged information was not disclosed to third parties and was restricted to members of the
association
④
The providers of information can be easily identified

Whether the KFTC’s information exchange prohibition order violated the principle against excessive
punishment  violation found
 The Seoul High Court ruled that “other measures necessary for correction” under the MRFTA do not
include measures stronger than a cease and desist order on the violating activity, and
 Held that the information exchanged in the subject case consist of information vital to business
operations, and as such, a prohibitive order on the exchange itself is outside the reasonable scope
of KFTC’s corrective orders and thus a violation of the principle against excessive punishment
24
C. Korean Cases relating to Information Exchange
2. Flour Cartel Case
 Supreme Court Decision(2009)



Found illegal collusion
Upheld Seoul High Court decision
Whether the KFTC’s information exchange prohibition order violated the principle against excessive
punishment  No violation
 The purpose of the information exchange in the subject case was to facilitate illegal collusion, and
as such,
h the
h KFTC’s
KFTC’ prohibitive
hibi i order
d iis within
i hi the
h scope off ““measures necessary ffor correction”
i ”
under the MRFTA
25
13
C. Korean Cases relating to Information Exchange
3. Life Insurance Cartel Case
 Facts
 From 1998 to 2006 16 life insurance companies:
①
“agreed” to fix the discount rate for fixed-rate individual insurance products and the reference
rate for variable rate individual life insurance products; and
②
“exchanged non-public information” on future discount rates and reference rates and then used
such information to decide their own respective rates.
 The behavior involved two distinctive time periods.
①
From 1998 to early 2001, the insurance companies actually agreed to directly fix the discount
rates and reference rates.
②
From early 2001 to 2006, they exchanged non-public, pre-market disclosure information on
future discount rates and reference rates, and then set their own respective rates.
26
C. Korean Cases relating to Information Exchange
3. Life Insurance Cartel Case
 KFTC Determination (2011)
 KFTC held that 16 life insurance companies:
①
“agreed” to fix the discount rate for fixed-rate individual insurance products and the reference
rate for variable rate individual life insurance products; and
②
“exchanged non-public information” on future discount rates and reference rates and then used
such information to decide their own respective rates.
 KFTC found that 16 life insurance companies:
①
From 1998 to early 2001, actually agreed to directly fix the discount rates and reference rates.
②
From early 2001 to 2006, exchanged non-public, pre-market disclosure information on future
discount rates and reference rates, and then used such information to set their own respective
rates.
 KFTC decided that the two practices and periods constituted a “single and
continuous” concerted act.
27
14
C. Korean Cases relating to Information Exchange
3. Life Insurance Cartel Case
 KFTC Determination (2011)
The KFTC examined: (1) the nature of the market and the concentration level; (2) the nature,

type, and specificity of the information exchanged; (3) the timing and frequency of
exchanges; and (4) the secrecy of the exchange.

The KFTC found that agreement after 2001 was not an explicit agreement.

It is rather a tacit agreement to indirectly, but still jointly, fix the price by exchanging
sensitive information.
The KFTC held that the exchange of sensitive information itself constituted a price-fixing

agreement.
t
The KFTC imposed prohibition order on information exchange and administrative fines

28
C. Korean Cases relating to Information Exchange
3. Life Insurance Cartel Case
 Court Decision
 Seoul High Court reversed the KFTC’s decision (2013)

Although the KFTC alleged “one single conduct continuing” from 1998 to 2006,

the Court looked at two distinctive alleged cartel periods with two different types of conduct:
①
the first period from 1998 to 2000  companies allegedly agreed to directly fix the rates
②
the second period from 2001 to 2006  the companies exchanged information on future
rates and then set their own respective rates

Regarding the relationship between information exchange and concerted conduct, the Court
noted that Korean competition law requires not just an exchange of price information but an
“agreement” to fix, maintain, or change prices.
29
15
C. Korean Cases relating to Information Exchange
3. Life Insurance Cartel Case

For the second period (from 2001 to 2006), as long as there was no explicit or even implicit
price-fixing agreement among the life insurance companies, the mere proof of price information
exchanges did not establish a violation of Korean competition law.

Therefore, the Court held that the mere fact that insurance companies exchanged information
and then individually decided their own rates did not prove that there was the requisite
“agreement” under the Korean competition law.

The Supreme Court upheld Seoul High Court’s decision (2014)
30
31
I.
D. Implication & Lesson
31
16
D. Implication & Lesson
 Information Exchange: Murky Area
 Information exchange between competitors remains a murky area of
competition law, as it is not always clear when pro-competitive information
sharing ends and collusive conduct begins.
 Competition authorities must adopt a more proactive approach to
dissuading anti-competitive information exchange.
 This can be done by providing clear guidelines on what is acceptable and
unacceptable information exchange.
32
D. Implication & Lesson
 Practical Guideline
 Type of Information Exchanged
Insofar as sensitive information exchanged regarding prices or pricing policies
(discounts, costs, terms of trade and rates, etc.) is concerned, discussions about
current and future prices are usually characterized as anti-competitive price-fixing
arrangements.
 Manner in which Information is Exchanged
There is more likely to be an appreciable effect on competition where the
information exchanged is limited to specific undertakings to the exclusion of their
competitors and customers.
33
17
D. Implication & Lesson
 Rulings of the KFTC regarding Information Exchange
 Pricing
 Since price information is required to be kept confidential until it is made
publicly available, the KFTC has ruled that the sharing or disclosure of
pricing information (including the timing and magnitude of price
fluctuations) among competitors creates a presumption of price-fixing if
the competitors were aware of each others’ price information that should
have been confidential and non-public in nature.


Highly

Sensitive

Topics

PRICING INFORMATION
Fixed prices
Standard price lists
M i rates
Margin
t
Interest rates and charges on credit card services
Discounted prices
34
D. Implication & Lesson


Highly
Sensitive 
Methods of 
Sharing

Exchange of information among competitors through regular and common channels
Exchange of information at meetings held to discuss pending business agenda and
gatherings, or by telephone, facsimile or e-mail
Dissemination of information fabricated by a division of a competitor upon collection
Disclosure of information at customer’s place of business
Exchange of information through business associations or meeting groups formed by
competitors

Between representative directors or directors of competitors

Between vice-presidents or department heads with authority over price
Highly
Sensitive 
Participants 
Between headquarter employees and heads of subsidiaries or branches
Between sales personnel
35
18
D. Implication & Lesson
 Methods of Determining Price
 The KFTC views the method of determining prices as a category of pricerelated information and gives it equal weight in its determination of
whether the sharing of such information constitutes collusion.
INFORMATION ON METHODS OF DETERMINING PRICE
Highly
Sensitive
Topics

Formulae and variables applied in determining prices

Method of calculation used to determine prices

Ratio of discount rates for various contractual terms to discounts authorized to be granted
by sales personnel
36
D. Implication & Lesson
 Sales Volume
 Sharing of sales volume information among competitors is held to be a
strong presumption of restraint on output.
INFORMATION ON SALES VOLUME
Highly
Sensitive
Topics

Daily, monthly or quarterly sales volume

Annual sales volume

Sales volume by geographical locations and products
 Market Share
g of information on the respective
p
market shares of competitors
p
 Sharing
constitutes strong circumstantial evidence of the likelihood of restraint on
output among competitors.
Highly
Sensitive
Topics
INFORMATION ON MARKET SHARE RATIOS

Market share information of competitors by geographic and product market

Monthly and annul market share information
37
19
D. Implication & Lesson
 Lesson from Korean cases

Even if an exchange of sensitive information in and of itself does not constitute
an illegal price-fixing agreement, it still is relevant and likely powerful
circumstantial evidence in proving an implicit agreement.

In ‘Life Insurance Cartel Case’, the Court implicitly rejected the KFTC’s contention
that the exchanged information amounted to a price-fixing agreement.

Antitrust enforcement agencies need to push the boundaries of the law where
appropriate and necessary.
38
Thank You
39
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