What is a market-dominant entity?
In general, this term refers to a ‘monopolistic or oligopolistic business entity’, but not only a supplier (distributor), but also a buyer may serve as a market-dominant entity.
It is a business entity in a position to determine, maintain, or change, alone or jointly with other business entities, the price, quantity, quality, or other terms and conditions of transactions of a specific commodity or service (Subparagraph 7 of Article 2 of the Monopoly Regulation and Fair Trade Act).
Criteria for determination of market-dominant position
If a business entity’s market share is at least 50% or the aggregate of market shares of not more than three business entities is at least 75%, such business entities shall be deemed market-dominant entities (Article 4 of the Monopoly Regulation and Fair Trade Act).
* Excluding business entities, the annual sales or purchase of which amount to less than four billion KRW, or the market share of which is less than 10%.
However, a market-dominant entity shall be determined by comprehensively taking into consideration whether and to what extent a barrier to entry exists, the relative size of competitors, etc. in addition to the criteria based on market share.
Types of Abuse
The “abuse of market dominant position” does not regulate having a market dominance per se, but the act of abusing one’s dominant position in the market.
The abusive practices are classified into five types (Article 3-2 of the Monopoly Regulation and Fair Trade Act).
Control of production output
Interference with business activities
Limiting market entry
Exclusion of competitors or Hindrance to consumers’ interests
Sharply raising or moderately cutting the prices of goods or services without just cause in contrast to changes in their supply and demand, and costs (limited to what is ordinarily required in the same or similar type of business) necessary to supply the goods or services
Control of Production Output
Sharply reducing the supply of goods or services without just cause in the light of recent market trends or reducing the supply of goods or services without just cause despite a short supply in distribution channels
Interference with Business Activities
Hindering the business activities of other business entities by : directly or indirectly Interfering with the purchase of raw materials by other business entities needed for production without just cause, hiring an employee essential for the business activities of other business entity by providing or promising to provide the employee with excessive economic benefits in the light of normal practices, or denying, interrupting, or limiting use of or access to elements indispensable for other business entity to produce, supply, and sell its goods or services without just cause, etc.
Limiting Market Entry
Hindering the market entry of new competitors by : directly or indirectly concluding an exclusive transaction contract with a distributor without just cause, purchasing rights, etc., which are necessary for existing business entities to continue their business activities, without just cause, denying or limiting use of or access to elements indispensable for a new competitor to produce, supply, and sell its goods or services without just cause, etc.
Exclusion of Competitors or Hinderance to Consumers’ Interests
Unfairly supplying goods and services at lower prices or purchasing at higher prices than the arm’s length price, thereby likely to exclude competing business entities or unfairly making a transaction with a transaction partner on the condition that the transaction partner does not make any transaction with a competing business entity.
Sanctions against Offenses
Administrative sanctions (corrective measures and penalty surcharges)
Issuing an order to lower prices, stop engaging in the relevant practices, publish the fact that the offender is ordered to take corrective measures, or other measures necessary to correct such violation
A penalty surcharge not exceeding 3% of sales may be imposed, but a penalty surcharge not exceeding 1 billion 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 3 years or by a fine not exceeding 200 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.