Supreme Court Rules on Extraterritorial Application of Antitrust Law - International Law Office

Decision
Jurisdiction
Service of Process
Statute of Limitations
Comment

The Supreme Court recently affirmed that six US, German and Japanese graphite manufacturing companies had violated the Monopoly Regulation and Fair Trade Act when they engaged in cartel activities outside Korea.

The court found that the companies had agreed to fix and maintain the prices of their products in the international market, and that these agreements had directly affected the Korean market. This ruling is highly significant because it is the first time that a Korean court has recognized the extraterritorial application of domestic antitrust law. In addition, from a procedural standpoint the ruling confirmed that Korean regulators may serve process by registered international airmail. The case also clarified how to calculate the statute of limitations period when cartel activity occurs over a period of time.

Decision

The court dismissed the manufacturers' appeal alleging that the act does not apply to a concerted act conducted by foreign companies outside Korea. In doing so, the court reasoned that:

• the act applies to foreign companies if the concerted act produces an adverse anti-competitive effect in the domestic market;
  
  
• delivering the relevant documents by registered mail was a valid service of process under the Administrative Procedure Act; and
  
  
• the action by the Korea Fair Trade Commission (KFTC) was not time-barred (the statute of limitations for a conspiracy to fix a price under the act is five years).

Jurisdiction

The court stated that the purpose of the act is to promote fair and free competition in the domestic market, thereby encouraging competition and protecting the welfare of the general public. Hence, the court reasoned that when domestic economic interests are at stake, the KFTC may exercise jurisdiction even if the illegal activity occurred outside Korea. On these grounds the court ruled that since the six graphite electrode manufacturers had agreed to fix and maintain prices internationally, which caused substantial economic harm to the Korean market, it could exercise jurisdiction over those companies to apply Korean antitrust law.

Service of Process

The court denied the petitioners' motion to dismiss the KFTC's complaint on the ground of improper service of process. According to the court, under Article 3(2) of the Regulations on the Administration and Procedure of the KFTC Proceedings, the Administrative Procedure Act governs methods of service of process in proceedings involving the KFTC.

The court stated that even though no specific provisions in the Administrative Procedure Act expressly authorize a government agency to serve process by mail to a foreign entity residing in a foreign country, the provisions of the Administrative Procedure Act imply that such delivery is permissible.

Statute of Limitations

The court also denied the petitioners' argument that the KFTC's enforcement action was time-barred. The court concluded that the petitioners' concerted acts over several years constituted a single act for the purposes of the statute of limitations and, hence, the statute of limitations commenced from the date of the conspirators' last meeting (in February 1998). The court found that over the years the petitioners, for the purpose of restraining competition, had conspired with each other to fix, maintain or change the prices of their products, and had also agreed to establish rules on their decision-making process. During the course of the conspiracy, the petitioners held numerous meetings based on their prior promises in order to achieve the desired objectives. The court ruled that despite changes in the contents of the agreements and other matters, a series of acts conducted by the petitioners should be viewed as a single, unfair concerted act.

Comment

As shown in the court's decision, the Korean courts and the KFTC have become more willing to exercise jurisdiction over foreign companies when domestic economic interests are at stake, and they tend to impose severe sanctions on cartel conspirators. On a practical level, the court's ruling may spur foreign companies to apply for a leniency programme offered by the authorities as early as possible in order to reduce their potential liability for fines or penalties.

For further information on this topic please contact Sai Ree Yun or Youngjin Jung at Woo Yun Kang Jeong & Han by telephone (+82 2528 5200) or by fax (+82 2528 5228) or by email (sryun@wooyun.co.kr or yjjung@wooyun.co.kr).