Abuse of dominance in South Korea

Abuse of dominance

How is abuse of dominance defined and identified? What conduct is subject to a per se prohibition?

The legislation and case law follow an effects-based rule of reason approach, and no conduct is subject to a per se prohibition. To constitute the abuse of market-dominant position, there must be intent or purpose to restrict competition in a relevant market, thereby artificially influencing the free market system, and the existence of potentially abusive acts raising competitive concerns must also be objectively proven (Supreme Court decision in case No. 2002Du8626, rendered on 22 November 2007, the Posco case). This case, based on an effects-based approach, provides crucial guidance for the KFTC and courts in assessing the abuse of market-dominant position.

Does the concept of abuse cover both exploitative and exclusionary practices?

The abuse of market dominance under the MRFTA includes both exploitative abuse and exclusive abuse. Under article 3-2(1), the exploitative abuse includes abusive practices of pricing, output control, and reduction of consumer welfare, while the exclusive abuse includes practices of interfering with other businesses, interfering with new competitors’ entry to the relevant market and excluding competitors. However, the KFTC focuses more on the exclusionary abuse than the exploitative abuse in its regulation of dominance.

What link must be shown between dominance and abuse? May conduct by a dominant company also be abusive if it occurs on an adjacent market to the dominated market?

A causal relationship is required between dominance and abuse.

In addition, the KFTC and Supreme Court acknowledge the concept of leverage. The Supreme Court held that if a dominant firm of a relevant market unfairly interferes with the business activities of other firms in an adjacent market by leveraging its dominance in the relevant market, such abusive interference can constitute the abuse of market-dominant position in the adjacent market (Supreme Court decision in case No. 2008Du1832, rendered on 13 October 2011).

What defences may be raised to allegations of abuse of dominance? When exclusionary intent is shown, are defences an option?

Pursuant to the Supreme Courts’ assessment on unreasonableness in the Posco case, the accused firm can raise a defence that it did not have intent or purpose to maintain or enhance monopoly power in a relevant market - the subjective element - or the concerned act does not raise competitive concerns - the objective element.

Even though exclusionary intent was shown, the firm can still raise the defences such as the unlikelihood or non-existence of anticompetitive effect based on the efficiency gains theory. In many cases, an economic research report analysing potential anticompetitive effect in a relevant market by an economist is used to provide an empirical basis.