This article was published on May 13, 2025, at 4:15 p.m. on the ChosunBiz RM report site.
The 'Fairness in Dealings with Agencies Act,' which penalizes manufacturers for unfair disadvantages given to their agencies, has been in effect since 2016. It aims to prevent manufacturers (甲) from abusing their superior position in transactions against agencies (乙).
So far, the Fair Trade Commission has tended to apply the agency law widely regarding the manufacturer-agency relationship. However, a recent court ruling stated that even if a manufacturer is larger than the agency, if the market structure allows the agency to choose the manufacturer, it cannot be concluded that there is an abuse of superior position. This implies that if the manufacturer proves that it does not have a substantial superior position over the agency, it may be exempt from sanctions for violations of the law.
◇ Fair Trade Commission “Shifted the interest burden of 3 billion won to 130 agencies”
The Fair Trade Commission imposed a penalty surcharge of 967 million won on Jeil Feed in April 2023. Alongside this, it issued a corrective order stating, 'The overdue interest arising from delays in payment for feed by the feed contractors should not be deducted from agency commissions.' The Fair Trade Commission determined that Jeil Feed transferred the burden of 3 billion won in overdue interest for feed payments it did not receive from farms between 2009 and 2021 to the commissions of 130 agencies.
The two companies had a manufacturer-agency relationship and were significantly different in scale. Jeil Feed is a livestock feed manufacturer under the Harim Group, with sales reaching about 790 billion won last year. In contrast, agencies have sales in the range of tens of millions of won, much of which comes from transactions with Jeil Feed. A legal expert noted, 'At a glance, it appears that the two companies are in a superior-subordinate relationship, and if the agency claims it has been disadvantaged, Jeil Feed could be subject to sanctions from the Fair Trade Commission.'
◇ Court “Must examine whether there is indeed a superior-subordinate relationship”
Jeil Feed has filed a lawsuit against the Fair Trade Commission over the penalty surcharge and corrective order. Law firm TaePyungyang is representing Jeil Feed. Whether Jeil Feed and the selling agencies constitute a superior-subordinate relationship has become a point of contention.
Law firm TaePyungyang focused on proving that Jeil Feed and the selling agencies are in a cooperative relationship rather than a superior-subordinate relationship, considering the domestic compound feed market situation.
First, TaePyungyang explained to the court the structure of the domestic feed market. It noted that 'more than 60 manufacturers are competing in the domestic compound feed market, and due to the nature of the products, differentiation is minimal, resulting in primarily price competition.' It also stated that 'agencies can have significant influence over farmers' choices of compound feed,' indicating that no single feed manufacturer can dominate the market, and rather, the agency can recommend specific products to consumers.
Next, TaePyungyang explained to the court that agencies are not bound by exclusive contracts with Jeil Feed and can also enter into concurrent contracts with other feed manufacturers. Consequently, examples where Jeil Feed's sales have declined were presented. It's argued that Jeil Feed does not have a structure that allows it to unilaterally impose disadvantages on agencies; rather, it needs to cater well to the agencies.
The Seoul High Court Administrative Division 7 (Chief Judge Koo Hoe-geun) recently ruled in favor of Jeil Feed in its lawsuit against the Fair Trade Commission, stating that it 'cancels both the corrective order and the penalty surcharge.' The court concluded that 'it is difficult to determine that Jeil Feed has a superior position over the agencies solely based on the fact that it is categorized as a major supplier with substantial business capabilities.'
The court also commented on the Fair Trade Commission's investigation process. It pointed out that issuing a disposition after investigating only one agency that reported the incident raises concerns. The court noted, 'The Fair Trade Commission made its determination solely based on the complainant's claims and the general relationship between suppliers and agencies, concluding that the plaintiff has a superior position over all involved agencies in this case.'
A representative from law firm TaePyungyang stated, 'In the future, when determining whether to recognize the transaction status of suppliers towards agencies, it is expected to conduct reviews of individual and specific circumstances, such as who has substantial influence over the client, whether alternative transactions can be easily found, and whether specialized investments are needed for transactions with the supplier.'