What is the practice of resale price maintenance?
Resale price maintenance refers to an act whereby a business entity that produces or sells products sets prices for each stage of transaction in advance and forces other businesses that resell those products to sell them at the specified price or to make transactions under binding terms and conditions. (Subparagraph 6, Article 2 of the the Monopoly Regulation and Fair Trade Act)
It can be exemplified by an act whereby a manufacturer sets the wholesale or retail prices in advance and force other businesses to sell the products at the specified prices.
Purpose of Regulation
In general, businesses at each stage of transaction (for example, retailers or wholesalers, etc) voluntarily determine the price at which the products are sold. If the practice of resale price maintenance takes place, it would undermine the free price determination right of business entities and competition in the distribution stage.
In addition, the practice of resale price maintenance creates the same effects as the practice of price fixing between sellers in terms of impact on the entire market, thereby undermining the efficiency of distribution networks and competition between manufacturers, which will limit consumers' choices. The practice is also known as "vertical collusion", which is distinguished from general "horizontal collusion" that takes place between competing business entities.
Exemption from application
① Works prescribed by the copyright law
- Publications (including electronic publications), among works, designated by the KFTC through discussions with the heads of the related central administrative agencies
ex) periodicals except for practical books, daily newspapers
- Exceptional allowance for resale price maintenance is given for publications to encourage the production of creative intellectual content
* For detailed information, refer to 「The Scope of Literary Works where the Practice of Resale Price Maintenance is Allowed」
② Products designated by the KFTC in advance (no case yet)
Products that satisfy all the following conditions; those where a business entity obtained a prior designation through a request from the KFTC for allowing resale price maintenance for the products in question: i) Products identical in terms of quality (or easily identifiable), ii) Daily products, iii) Products in which free competition is guaranteed
Sanctions against Offenses
Administrative Sanctions (Corrective Measures and Penalty Surcharges)
Issuing an order to suspend the practice of resale price maintenance, publish the fact it has ordered to take corrective measures, or other measures necessary to correct such violation.
A penalty surcharge not exceeding 2% of sales may be imposed, but a penalty surcharge not exceeding 500 million KRW may be imposed if no relevant sales have been made or it is impracticable to compute sales.
An offender accused by the KFTC is punishable by imprisonment for not more than 2 years or by a fine not exceeding 150 million KRW.
An offender who breaches an order to take corrective measures is punishable by imprisonment for not more than 2 years or by a fine not exceeding 150 million KRW, irrespective of whether the offender is a legal entity or individual.