Watchdog to slap $488.7 mil. fine on 4 starch makers for price rigging
Nam Dong-il, Vice Chairperson of the Korea Fair Trade Commission, speaks during a press briefing at Government Complex Sejong, Tuesday. Yonhap
Korea's fair trade watchdog on Tuesday decided to impose a record 747.6 billion-won ($488.7 million) fine on four starch producers for colluding to fix prices.
The Fair Trade Commission (FTC) said it made the decision after finding that Daesang Corp., Sajo CPK Ltd., Samyang Corp. and CJ CheilJedang Corp. fixed prices of starch and starch sugars from May 2018 to October 2025, noting the fine marks the largest amount for a single price-rigging case.
Starch and starch sugar products are used in the production of foodstuffs, such as confectionery, bread, noodles, beverages and beer. They are also used in the manufacturing sector, including the production of paper and steel.
"Thus, a hike in starch prices leads to chain effects across all levels of industry," the FTC said, noting the combined volume of related sales was estimated at 6.05 trillion won.
According to the watchdog, the companies' executive-level officials reached an overall consensus, with other details, such as price targets and timing, discussed through follow-up working-level meetings.
The FTC also ordered the companies to reset prices to the pre-collusion levels and report price changes to authorities every six months over the next three years.
The watchdog said the price adjustment was made considering such collusion continued for more than seven years, and that the four companies are highly likely to engage in another round of price rigging considering their dominant market positions.
According to the FTC, the four firms accounted for 95.7 percent of the business-to-business market for starch and 86.4 percent for starch sugars.
"Considering the nature of the industry, which calls for large-scale equipment, the entry of new players was limited, allowing them to stably maintain their market shares for 20 years," the FTC said.
The FTC added the four firms jointly purchased raw materials, such as corn, from overseas, leading to similar production cost structures, with the quality of products being similar and standardized.