The Consumers Class Actions in Korea - recent LPG litigation case () December 2, 2009 Korean Fair Trade Commission

detected that 6 Korean LPG(Liquefied Petroleum Gas) suppliers including two LPG importers and four oil refinery companies have fixed LPG prices during 6 years form January 2003 to December 2008. KFTC ordered LPG suppliers to correct illegal price-fixing practices, imposed a fine of 669 billion KRW (about 580 million USD), [ the biggest fine ever imposed by the KFTC] and referred the leader company for criminal prosecution. LPG is dived into two categories of propane and butane gas, propane gas is used by about 7,300,000 houses and restaurants for cooking and warming, and butane gas is used mainly by about 2,300,000 taxies, cargo trucks and cars for the disabled and veterans. According to KFTC, 6 LPG suppliers have engaged in a conspiracy to raise or fix the price of LPG. More specifically, two LPG importers regularly exchanged inside skinny on their price scheme, frequently held face to face meetings, and conspired together at least 72 times to keep their selling price gap constant. As a result the average price difference between the two LPG importers was maintained within only 0.01 KRW both for propane and butane gas. These LPG importers also regularly reported their prices to the four oil refinery companies in order to control the prices of LPG sold to consumers by LPG refueling stations. And to avoid competition, 6 LPG suppliers also maneuvered and enforced several anti-competition measures including the restraint of so-called Spot transaction and ban of so-called customer looting. During the six years of price-fixing, LPG sales amounted to 21 trillion KRW

(approximately 18 billion U.S. Dollars). () Until now, as to oil-related products, KFTC has granted orders to correct several times. For example 2000, KFTC imposed 121 billion KRWs fine against major Korean oil refinery companies for illegal price-fixing in military oil procurement bidding. And 2007, Four major oil refinery companies were also fined for 70 days price-fixing conspiracy of gasoline and kerosene. Especially this six years LPG price-fixing case is much blamed by LPG consumers and public opinion because LPG is a typical daily necessities for working class. So over 45,000 taxi drivers and over 1,000 disabled filed a lawsuit in the Seoul District Court against 6 Korean LPG suppliers, which account for 100% of the Korean LPG market (and I participated in that case as one of attorneys for the plaintiffs). The taxi drivers are the members of the Korean National Joint Conference of Taxi Association having 160,443 members as of December 2008 and the disabled are the members of the Parents Solidarity for the Disabled. The over 45,000 is a record number of plaintiffs (the largest number in Korean cartel litigation history). Until now there is no class action system in Korea except in securities trade fraud litigation case. But consolidation of cases is possible and a lot of people can sue together as co-plaintiffs in one case. What is needed to point one here is that in Korea, unlike in the U.S. federal law, the indirect purchaser also can sue to compensate antitrust damage. It is partially because there is no punitive damage system, for example trebling of damages, in Korea.

() The LPG lawsuits aim is looking for remedies for the cartel victims to their economic damage. The Monopoly Regulation and Fair Trade Act in Korea, enacted in 1980, aims at promoting fair and free competition and regulating improper cartels and unfair business practices. The article 19 section 1 of this Act provides that no enterpriser shall aggree with other enterpriser to engage jointly in act of fixing, maintaining or changing prices, and the article 56 providers that enterpriser violating the provisions of this Act and consequently causing damage to a person shall be liable for compensating such person for damage. So according to the article 56, the LPG suppliers shall be liable for LPG consumers damage if any (the LPG suppliers deny and sue against the pricefixing charges and we will wait for the administrative courts decision). () It is important and needed for consumers who suffer damage caused by cartel to seek compensation through litigation or other methods because administrative orders and fine itself are not enough for adequate deterrence to cartel. Only if the all excess profit can be returned to the overcharged consumers, the incentive to fix or change the price may vanish and the cartel can disappear. I heard that in the U.S. private enforcement of antitrust law is very dynamic and fulfilling fundamental role in the legal system. In Korea, private enforcement of antitrust law is on its beginning moment. Until now fair trade policies in Korea have been enforced mainly by administrative orders and fines (and sometimes through criminal charges). But nowadays

private enforcement is beginning manly through compensation litigation. To the extant I know, the first consumers antitrust litigation case in Korea is the school uniform price-fixing case (2001). And as mentioned above, in the military oil procurement bidding case, a big progress has been made. For the first time in consumers antitrust litigation history in Korea, the court (the Seoul District Court) has adopted econometric methods (multiple regression model) as reliable for calculating consumers antitrust damage. (But as mentioned below, the Appellate Court adopted yardstick method rather than the above mentioned econometric method). At present, following the cases of school uniform and military oil procurement litigation several other cases have seen proceeding including telephone fee fixing case, wheat flour price-fixing case and this LPG litigation case. () As in U.S. it is not easy for plaintiffs to prove all conditions necessary for compensation of antitrust damage in Korea. The casual connection between the defendants anticompetitive acts and the plaintiffs injury must be proved to a reasonable certainty. But in the estimation of antitrust damage, if the court require plaintiff to prove their damages to the same extent of certainty as in the causation, it is very difficult and sometimes impossible for plaintiff to prove their damage. And in some situations it is not adequate too. For estimating antitrust damage, the plaintiff must prove the so-called but-for price and but-for price hasnt really existed but can be just inferred from indirect materials, that is to say hypothetical. Because of the multitude of potential influences on business, a plaintiff can not

prove what would have happened with the same degree of certainly that it can prove what did occur. So in Bigelow case (Bigelow v. RKO Radio Pictures, 327U.S.251, 264 (1946)), the U.S. Supreme Court stated that Once the plaintiff establishes the fact of damage with reasonable certainty, the jury may make a just and reasonable estimate of the damage based on relevant data. This statement means that the burden for proving the amount of damages has a less exacting standard that of reasonable certainty used for causation. In fact, in Japan the Kerosene price-fixing cases were turned down by the Japanese Supreme Court (1988, 1989) in the reason of insufficient proving of causation and damage (the Supreme Court inferred that the causation was interrupted by the second Oil Shock(1977) and reversed the Appellate Courts decision. But this verdict was criticized by most scholars as too strict and afterwards Japanese Civil Procedure Ace has been revised to accept those criticisms partially. In Korea the Monopoly Regulation and Fair Trade Act has been revised 2004 in the same direction and now the Article 57 provides that when the occurrence of damage is deemed to be the result of a violation of this Act and proving the necessary facts to verify the amount of damage is extremely difficult, the court shall decide the substantial amount of damage based on the result of evidentiary investigation and in tent of overall pleading. So also in Korea the burden of proving the amount of damages is reduced compared to that of causation. () But even though a standard of reasonable certainty does not govern the calculation of damage, antitrust damage calculation should not rely on

speculation. In other words, antitrust damage estimation shall be reasonable and avoid speculation. The antitrust damage represents the difference between the price paid by the plaintiff and the price the plaintiff would have paid absent the antitrust violation (the so-called but for price). This standard compares actual prices and the prices that would have occurred but for the anti competitive acts. The two most common methods of calculating damages available are the before and after method and the yardstick approach. And the careful application of econometric methods can help isolate(control) the effects of antitrust violations from other coincident effects. Econometrics uses statistical techniques such as multiple regression analysis to estimate the relations between economic variables. But as mentioned above, in military oil procurement case in Korea the Appellate Court adopted yardstick method rather than the Seoul District courts multiple regression model in the reason that the difference between estimations of experts is too broad. So we should wait for the Korean Supreme Courts decision. () In this LPG case, the damages occurred to LPG consumers equal {the pricefixing period [actual (unfair) price - but for price] individual LPG consumption quantity per unit period}. The individual LPG consumption quantities can be measured by, for example, credit card usage specifics or LPG subsidy details inquiry and so on.

() In short, in Korea, there is no class action system in antitrust litigation, and there is also no trebling of damages. But as mentioned above the civil enforcement is much needed to adequately deter the cartel and the Monopoly Regulation and Fair Trade Act of Korea reduced the burden of proving the amount of antitrust damage. Now in Korea the civil enforcement of antitrust law is on its beginning stage and we need to watch the future progress.