By Kim Rahn
The Supreme Court upheld a high court ruling Monday that ordered two flour suppliers to pay compensation to a bread maker for damages arising from price fixing.
CJ CheilJedang and Samyang Corp. were ordered to pay 1.24 billion won and 230 million won respectively, to Samlip General Foods.
It is the first ruling by the top court in acknowledging raw material suppliers’ damage on middle consumers. The court has so far only recognized damages given to end consumers.
Similar lawsuits are likely to follow between raw material suppliers and their processors. Industrial manufacturing processes, such as automakers and electronic producers typically go through multiple stages leading to a final product.
Samlip filed the suit in 2006 after an antitrust watchdog concluded that the two flour makers fixed prices, claiming it suffered from losses from their collusion.
“CJ and Samyang fixed flour prices, so Samlip and other processors had to pay much more than they should have. According to the Fair Trade Law, the defendants should compensate Samlip’s damages,” the top court said.
“Samlip had to shift the financial burden to end consumers by raising the prices of its bread, so we uphold the appellate court ruling that reduced the amount of compensation,” it said.
In April 2006, the commission detected that eight flour manufacturers, including CJ CheilJedang and Samyang, colluded on production amounts of and price fixing spanning a period of five years from 2001.
It estimated the companies inflicted over 400 billion won worth of damage to end consumers, issuing a combined total of 43.4 billion won in fines.
Samlip, which made bread with flour from the two firms, asked them to voluntarily compensate it for losses ― a demand that was not accepted. Then it filed the suit in November 2006, demanding they pay 3.8 billion won in compensation.
The bread maker claimed it bought flour at unfairly high prices and sustained huge damages, while the two flour manufacturers said it was not price fixing because they set the prices for Samlip following separate discussions with the firm.
The lower and appellate courts recognized that Samlip had to unfairly spend about 1.5 billion won through the price fixing.
“This is a pioneer legal case on compensation responsibility for middle consumers. It is expected to affect other industries that involve multiple stages of manufacturing,” said lawyer Yang Ho-seung of law firm Yoon & Yang that represented Samlip.
Industry watchers presume other manufacturers using flour, such as cookie or ramen companies, may file similar lawsuits.