Fair Trade Law Q&A - Monopoly

Article 9 of the Fair Trade Act provides that, "Monopolistic enterprises shall not engage in any one of the following conducts: (1) directly or indirectly prevent any other enterprises from competing by unfair means;(2) improperly set, maintain or change the price for goods or the remuneration for services;(3) make a trading counterpart give preferential treatment without justification; or (4) other abusive conducts by its market power".

For example, if a monopoly enterprise requires upstream suppliers not to provide essential raw materials to other enterprises seeking to manufacture competing products, thereby preventing such enterprises from entering the market, the conduct may constitute a violation of the prohibition against "directly or indirectly prevent any other enterprises from competing by unfair means". Similarly, if a monopoly enterprise sells products below average variable cost in order to deter market entry or force competing enterprises to exit the market due to unsustainable losses, such conduct may violate the prohibition against "improperly set, maintain or change the price for goods or the remuneration for services". The prohibition against "make a trading counterpart give preferential treatment without justification" commonly arises in cases involving monopsony power. For example, a dominant purchaser may unilaterally impose excessively low purchase prices and require trading counterparts to sell products at those prices. The provision prohibiting "other abusive conducts by its market power" functions as a catch-all clause intended to address conduct not covered by the preceding subparagraphs. Whether particular conduct violates this provision must be determined on a case-by-case basis.