2014 ICN Cartel Work-shop

BOS 11

Daeyoung KimDirector, Int’l Cartel Div.

Korea Fair Trade Commission

2014. 10. 3

Should jurisdictions seek to allocate cases to prevent

double penalisation?

* The views and opinions expressed in this presentation are those of the author and do not reflect the official policy or position of the KFTC

2

contents

Ⅰ. Background

Ⅱ. Issues Raised

III. KFTC’s Approach

IV. Conclusion

3

Ⅰ. Background

1. Globalization of economy and competition lawEconomic activities are globally interdependent

Trade liberalization, various economic reforms, increased foreign di-

rect investment and offshoring are main reasons for horizontal and

vertical economic globalization

More and more jurisdictions are introducing competition

law Over 120 countries have competition authority and law in place, and

most of them have the law provision on extraterritoriality

U.S. China

Korea

Germany

France

Japan

Others

Intermediary: 24.63Intermediary: 80.05

Intermediary: 16.08

Intermediary: 3.25Intermediary: 0.7Intermediary:

62.79Value added: 6.54

Producer sale price: 194.04 (retail price in U.S: 600)

Global production network of iPhone 4(2011)

4

2. Example cases of overlapping jurisdictionMore jurisdictions are engaging in extraterritorial

application of competition law and law enforce-

ments are interconnected

Early 2000’s -> finished goods

• Graphite Electrode Cartel (1992-1998): Sanctioned by 4 ju-

risdictions(US, EU, Canada, Korea)

• Vitamin Cartel (1989-1999): Sanctioned by 5

jurisdictions(US, EU, Canada, Australia, Korea)

Recent Cases-> intermediaries

• LCD panel (2001-2006): Sanctioned by 5 jurisdictions(US,

EU, Japan, China, Korea) and other investigations continue

• Automobile parts (1996-2012): Sanctioned by 6

jurisdictions(US, EU, Canada, Australia, Japan, Korea) and

other investigations continue

Ⅰ. Background

5

Ⅱ. Issues Raised

6

Ⅱ. Issues Raised

General principle of extraterritorial application Anticompetitive behavior(cartel) + Effect to the domestic com-

petition order + Causal link(direct and uninterrupted) between

two

Consumer protection vs. Protection of competition “Competition law aims at consumer protection”

• All types of import of cartelized goods (whether finished or in-

termediary) can be target of cartel enforcement

Possibilities of overlapping jurisdictions are high

“Protection of competition is the primary purpose of competition

law”

• Extraterritorial enforcement should be limited to jurisdictions

where first “trade”(delivery or invoice) takes place

Slim possibilities of double penalization

1. What is the purpose of competition law?

7

Ⅱ. Issues Raised U.S. Alcoa case(1945): Effect doctrine

Timberlane case(1976): Jurisdictional rule of reason(balancing

theory)

Hartford case(1993): Effect doctrine (w/ consideration of comity)

EU Dyestuff case(1972): Single Economic unit doctrine

Woodpulp case(1988): Place of implementation doctrine

Japan CRT case(2009): Single Economic unit (of victim) doctrine

⇒ With absence of international hard law regulating extraterritori-

ality

and the standard evaluating the effect to domestic market,

each

jurisdiction has developed its own legal theories

⇒ Risks of double penalisation are growing

2. There exists universally accepted legal principle?

88

Ⅱ. Issues Raised

Indirect Sale

International Benchmark Price

3. Tricky Issues

Cartel(Intermedi-

ary)1st sanction

Effect(Assembled in subsidiary

A’ )2nd sanction

Headquarter of A

3rd sanction

Indirect import

4th sanction

Indirect import

5th sanction

Indirect import6th sanc-

tion…

Export

Single unitExport of finished goods

Global oligopo-

lists

International price insti-

tute

Cartelized info

Companies in country 1

Companies in country 2

Companies in country

3…

Make reference in setting prices: Effect

9

III. KFTC’s Approach

101010

III. KFTC’s Approach Korea’s Competition Law Article 2-2: The Act shall apply to activities carried out overseas

when they are deemed to have effect on the domestic market

Case Law Supreme Court(2014, Air cargo case): “domestic effect” means

“direct, substantial, and reasonably foreseeable effect”

Practices Invoice(bill to) or Delivery(ship to) Standard

• Refrain from claiming jurisdiction in indirect sale case

Comity

• Respect jurisdiction where direct sale took place

International cooperation

• Close coordination with other agencies in calculating relevant

turnover Aircargo case: reduce 50% of total out/in-bound shipments between

Europe and Korea considering the possibility of double counting after

consultation

11

IV. Conclusion

121212

IV. Conclusion

Active utilization of bilateral agreement Coordination and consultation of enforcement activities with re-

spect to a specific case Korea-Canada FTA Competition Chapter: “The Parties shall consult

from time to time about the effectiveness of measures undertaken by

each Party”

Close cooperation throughout all stages of investigation includ-

ing calculation of affected commerce

Information sharing plays a pivotal role in revealing the factual

issues and thus contributes to harmonized enforcement among

authorities

Endeavor to apply laws in “clear effect” cases Extraterritorial application based on indirect, secondary, abstract

effects on domestic markets can result in multiple penalisation

Comity and respect to more directly affected jurisdiction

1. In the short term

13131313

IV. Conclusion

Establishment of universally acceptable rule Common ground of case laws on extraterritoriality -> soft law

Active discussion in international fora (OECD, ICN) and consensus

building required

Introduction of optimal sanction designing system To prevent over-deterrent level of sanction, simultaneously inves-

tigating authorities should check others’ penalties and reflect

them accordingly

Mutual trust is of utmost importance and more proactive co-op-

erational mechanism(e.g., confidential information exchange) re-

quired

2. In the long term

14

Thank you for your atten-tion

daeyoungkim@korea.kr