High court approves ramen fines

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High court approves ramen fines

The Seoul High Court ruled Friday against the country’s two leading ramen manufacturers and upheld a decision by the Fair Trade Commission to slap heavy price-fixing fines on four makers of the country’s staple noodle.

Last year, the FTC imposed 136.2 billion won ($127.8 million) in penalties on Nongshim, Ottogi, Samyang Foods and Korea Yakult for colluding to fix prices over nine years through 2010.

Nongshim and Ottogi, the country’s No. 1 and No. 2 ramen makers, filed a joint administrative lawsuit against the FTC in August, saying the price hikes were made out of necessity following the increase of prices for ingredients such as flour and oil. They argued that each company made its own decision on the hikes.

The high court ruled that as implausible, saying the prices would have been set differently if there had been no collusion in fixing prices.

According to the FTC, the price fixing started in May 2001, when Nongshim raised its popular Shin Ramyun by 9.9 percent to 322 won. Within a month, all three other ramen makers raised the prices of their flagship products - Samyang Ramyun (Samyang Foods), Wang Ramyun (Korea Yakult) and Jin Ramyun (Ottogi) - to 322 won.

The prices were raised five times more over the next nine years, and each time the revised prices were identical among brands or very similar.

The collaboration came to an end after Samyang decided to lower the prices of its products in February 2010. Samyang, which cooperated in the FTC’s investigation, told the FTC that the senior sales executives of the four companies gathered in a Seoul hotel in January 2001 and agreed on the price-fixing scheme.

Thanks to its cooperation with the investigators, Samyang was exempt from paying an FTC fine, which would have been 12 billion won.

The FTC hit Nongshim with a 108.0 billion won penalty for its leading role in the scheme while fining Ottogi 9.8 billion won and Korea Yakult 6.2 billion won.

“Ramen, which is a basic item in the lives of working-class households, is sensitive to a change in price,” the court said in its ruling. “Even though the company had a high market share, it had a sufficient motive to raise the price in collusion rather than taking the risk [of getting caught] on its own,” the court said, referring to Nongshim, which makes up around 70 percent of the ramen market in Korea.

Officials at Nongshim and Ottogi were unhappy with the court decision and said they would likely file an appeal to the Supreme Court.

Korea Yakult filed a separate administrative lawsuit with the Seoul High Court against the FTC. The ruling in that case is due next month.

BY PARK MIN-JE, MOON GWANG-LIP [joe@joongang.co.kr]
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