“Is industry information exchange colluding?”… ‘Speech and action risks’ that companies need to be aware of

According to a press release from the Korea Economic Association, there was a case in which an automobile parts supplier became the subject of a collusion investigation by the Fair Trade Commission after making a statement at an industry meeting that "we have no choice but to adjust the delivery unit price similarly." Even though there was no actual conspiracy to raise prices or conclusion of a separate contract, the mere circumstance of exchanging words put the company on the verge of fines, punitive damages, and even criminal punishment.

Article 40, Paragraph 1, Item 9 of the Monopoly Regulation and Fair Trade Act (hereinafter referred to as the Fair Trade Act) prohibits acts that substantially limit competition in certain trade areas by exchanging price, production volume, and other information prescribed by Presidential Decree with other businesses (including the business that committed such acts). This means that even if there is no explicit agreement, the exchange of sensitive information may be considered collusion if it is determined that it ultimately restricted market competition.

In fact, the Fair Trade Commission has strengthened the tendency to view information sharing between competitors as implicit communication, that is, as strong evidence of collusion, through the 'Unfair Collaborative Conduct Review Guidelines'. In particular, Article 44, Paragraph 2 of the Enforcement Decree of the Fair Trade Act specifies the information subject to sanctions as the cost of products, shipment volume, inventory volume, sales volume, transaction conditions, or payment conditions of price or consideration. Therefore, even in meeting minutes, emails, messenger conversations, and even private conversations, if the above sensitive information is exchanged, there is ample room for it to be interpreted as a signal of price cooperation.

The problem is that these risks can occur even if no actual collusion was planned or executed. This is because, from the perspective of practitioners, the line between sharing information and expressing intent to collude can feel ambiguous. In particular, companies with denser industry networks or more complex distribution and marketing structures have more external contact points, and there are many cases where unintentional words and actions become a problem in exchanges with partners or competitors. If an investigation by the Fair Trade Commission is initiated, the company will bear the burden of proof to actively prove that there was no collusion.

Therefore, companies must establish a three-step compliance strategy of ‘prevention-inspection-response’ to minimize information exchange risks.

First, in the preventive stage, internal guidelines must be elaborated. Prohibited information stipulated by the Enforcement Decree of the Fair Trade Act must be specified and employees must be educated that sharing it with competitors can be considered collusion. In particular, when attending an association meeting or conference, it is safe to specify the scope of permitted speech in advance.

Next, in the inspection stage, the system for managing records must be maintained. It is important to recognize that materials such as reports and competitor trend analysis documents may be subject to investigation in the event of a dispute, and strict preparation and storage standards must be followed. Communication records with the outside world should also be managed transparently to prevent unintentional exchange of information.

If you are at the stage of being investigated for suspicion of collusion, you must quickly prepare an initial response logic. The key is to prove that the information exchange at issue was not intended to restrict competition and was unrelated to price or production decisions. Due to the nature of information exchange collusion, interpretation is more important than objective documents or data, so if data or statements that can support 'there was no intention to agree' are not organized in the beginning, suspicion may become confirmed.

A corporate crisis can begin not only with the failure of a grand strategy, but also with seemingly trivial loopholes in information management. Now that fair trade regulations are becoming more sophisticated and standards for judging the illegality of information exchange are becoming stricter, it is a time when a 'verbal risk management strategy' that is as detailed and strict as a management strategy is required.
 

Small Business Team

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