Flour Prices Rigged for 6 Years: Fair Trade Commission Hits Millers with Record 671.045 Billion Won Fine

News1 [Financial News] The Fair Trade Commission has uncovered long-running collusion among seven flour millers and imposed the largest fine in its history. According to the Korea Fair Trade Commission (KFTC) on the 20th, seven millers, including Daehan Flour Mills, CJ CheilJedang, SAJODONGAONE, Samyang Corporation, DAESUN Flour Mills, Samhwa Flour Mills and Hantop Inc. , were found to have colluded on flour supply prices and volumes for about six years starting in November 2019.
045 billion won. This is the largest amount ever levied in a cartel case by the commission. The investigation found that the companies had prearranged the size and timing of price increases, as well as supply rankings and volumes, with major food makers such as Nongshim, Paldo and Pulmuone.
They also colluded on prices for smaller trading partners and distributors. According to the KFTC, they reached price and volume agreements 24 times in total and held 55 meetings at the executive and working levels during the collusion period. The collusion intensified after competition in the domestic milling industry became more heated.
The KFTC said that when Daehan Flour Mills aggressively secured supply volumes for Nongshim in late 2018, rival firms became concerned about market instability. A consensus then formed among leading companies to avoid excessive competition. The collusion later expanded from some major clients to all customers and all product lines.
In particular, the companies quickly passed on price increases when global wheat prices rose. When wheat prices fell, however, they minimized or delayed price cuts. The investigation also found that when Nongshim and others demanded lower delivery prices following stabilization in wheat costs, the millers had already agreed in advance on the minimum size of the reduction.
The collusion continued even during the government's flour price stabilization support program. 1 billion won in subsidies to milling companies in response to a sharp surge in global grain prices, but the firms continued their price-fixing scheme. The effects of the collusion were also clear.
As of September 2022, the millers' flour selling prices had risen by as much as 74% from late 2019, when the collusion began, according to the KFTC. Operating profit margins also improved for both leading and smaller companies after the scheme began.
69 trillion won. 448 billion won, Hantop Inc.
448 billion won. Nam Dong-il, vice chairperson of the KFTC, explained that "the fine is calculated by applying the base rate to the related sales amount, and a rate of 15% was used in this case.
" Along with the fines, the KFTC also issued seven corrective orders, including orders to stop the illegal conduct, independently determine prices and report price changes. In January, the commission had already completed referrals to prosecutors for the seven millers and 14 executives and employees involved in the collusion, following a request for criminal charges.
Vice Chairperson Nam said, "This action is meaningful because it uncovered and sanctioned six years of flour price collusion by millers with a combined market share of up to 90%. " He added, "Through corrective measures such as price reset orders, we expect to recover illicit gains and ease the burden on households.
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News1 [Financial News] The Fair Trade Commission has uncovered long-running collusion among seven flour millers and imposed the largest fine in its history. According to the Korea Fair Trade Commission (KFTC) on the 20th, seven millers, including Daehan Flour Mills, CJ CheilJedang, SAJODONGAONE, Samyang Corporation, DAESUN Flour Mills, Samhwa Flour Mills and Hantop Inc. , were found to have colluded on flour supply prices and volumes for about six years starting in November 2019.
hippo@fnnews.com Kim Chan-mi Reporter