Collusion in Duck Meat Prices Over 5 Years... Multiple Companies Caught in Price-Fixing Scheme

Jeon Sang-hoon, Head of the Cartel Investigation Division at the Korea Fair Trade Commission, is briefing at the Government Complex Sejong in Sejong City regarding the corrective orders and a total fine of 6.236 billion KRW imposed on nine businesses and the Korea Duck Association for colluding on the price and production volume of fresh duck meat.
[Photo by Yonhap News]

[Asia Economy Reporter Hwang Sumi] Companies that colluded for over five years to raise duck meat prices have been caught in large numbers.

According to Yonhap News on the 6th, the Korea Fair Trade Commission (KFTC) announced that it imposed corrective orders and a provisional fine of 6.012 billion KRW on nine manufacturers and sellers who violated the Monopoly Regulation and Fair Trade Act (Fair Trade Act).

The fines by company are as follows: Dasol (1.986 billion KRW), Jeongdaun (1.075 billion KRW), Juwonsan Duck (678 million KRW), Sajo Won (570 million KRW), Chamfre (550 million KRW), Seongsil Nongsan (541 million KRW), Samho Sulfur Duck (356 million KRW), Yuseong Nongsan (170 million KRW), and Moran Foods (86 million KRW).

These companies agreed and executed the sales price or production volume of fresh duck meat 17 times from April 2012 to August 2017. They jointly raised the price of the standard whole duck size 20 (reference price), which serves as the basis for fresh duck meat sales prices, or limited production by reducing or discarding parent ducks (Siori, ducks bred for production) and hatching eggs (eggs laid by breeding ducks). When colluding on prices, they also set upper limits on discount amounts as well as the reference price.

Investigations revealed that they conspired mainly through the Affiliation Council, a meeting of CEO-level members within the Korea Duck Association, and a meeting of sales managers at the sales headquarters level. CEO-level and sales headquarters-level members of the Duck Association met frequently and communicated to coordinate the collusion. To ensure compliance with the agreements, they planned mutual cross-checks and even visited other companies’ breeding duck culling sites.

The market share of these companies reached 92.5% based on domestic duck slaughter volume in 2016. In fact, the operating profit of companies involved in price collusion increased by about 186%, from 19.74 billion KRW in 2016 to 56.45 billion KRW in 2017.

Regarding this, the KFTC also decided to impose corrective orders and a provisional fine of 224 million KRW on the Duck Association for prohibited acts by business organizations. This was for five instances between April 2012 and November 2016 where they agreed to reduce the number of ducklings introduced, reduce breeding ducks, or discard hatching eggs.

The nine companies and the Duck Association strongly opposed during the KFTC’s review process. They claimed that production reduction was a legitimate act following government supply and demand adjustment policies and thus not subject to the Fair Trade Act.

However, the KFTC did not accept this. It pointed out that the Ministry of Agriculture, Food and Rural Affairs had never issued production adjustment or shipment control orders related to this case. It also clarified that the production volume restriction agreement and decision were made before the Duck Supply Adjustment Council, which includes Ministry officials, decided on breeding duck reduction and hatching egg disposal, and that receiving self-help funds (compensation for production reduction costs) from the Ministry does not justify production volume collusion.

Jeon Sanghoon, head of the Cartel Investigation Division at the KFTC, emphasized that prices do not fall under the supply and demand adjustment domain and that no laws in Korea permit such price collusion. He added that price collusion itself is subject to sanctions under the Fair Trade Act.

Meanwhile, consumers expressed anger at the industry’s collusion but also criticized the amount of the KFTC’s fines. One consumer said, "They cheated, but the fine is a pittance," calling it a slap on the wrist. They added, "Since it’s not a penalty but more like a fee, I would just pay the fine myself."