🚨 Price-Fixing (Cartel)

Today Korean Social News for Beginners | 2026.02.22

0️⃣ 7 Flour Companies That Control 88% of the Market Suspected of 6-Year Price-Fixing

📌 7 Flour Companies Suspected of 6-Year Cartel…Fines Could Reach Over 1 Trillion KRW

💬 South Korea's Fair Trade Commission (FTC) has started reviewing allegations that 7 flour milling companies — which together hold 88% of the business-to-business (B2B) flour market — secretly agreed to fix prices and control supply volumes. The alleged cartel lasted about 6 years, from November 2019 to October 2025. The total sales linked to this case are estimated at around 5.8 trillion KRW. If found guilty, the companies could face fines of up to approximately 1.16 trillion KRW. As the government continues to focus on keeping living costs down, this case could trigger broader investigations into other food ingredient markets as well.

💡 Summary

• A cartel (price-fixing) means businesses secretly agree to set prices or limit supply, which is strictly forbidden under the Fair Trade Act.
• The highly concentrated flour market — where just a few companies control most of the supply — is seen as the structural reason why this long-term cartel was possible.
• If the companies are found guilty, fines of over 1 trillion KRW (up to 20% of related sales) could be imposed.

1️⃣ Definition

Price-fixing (cartel) means two or more companies secretly agree in advance on prices, production quantities, or trading terms so they do not compete against each other. South Korea's Monopoly Regulation and Fair Trade Act (the Fair Trade Act) calls this an "unfair joint act" and strictly prohibits it.

Simply put, imagine Company A and Company B both sell chips in a supermarket. Even though they look like competitors, they secretly agree behind the scenes: "Let's both raise our prices at the same time." Customers think they have a choice, but no matter which brand they pick, they end up paying the same high price. This is exactly what a cartel does — it keeps the appearance of competition while harming consumers — which is why it is illegal.

💡 Why does this matter?

• When companies fix prices, consumers end up paying more than they would in a fair competitive market.
• Flour is a key ingredient in bread, noodles, snacks, and crackers, so a cartel in flour affects everyday food prices across the board.
• Without real competition, companies have no reason to improve quality or lower costs.
• This case directly touches the fairness of the food market that every household depends on.

2️⃣ What Happened and Why It Matters

📕 Key Facts of the Case

• The FTC has begun a formal review of long-term cartel allegations against flour companies. Key facts are as follows.

  • The Fair Trade Commission sent investigation reports to 7 flour milling companies that together hold 88% of South Korea's B2B flour market.
  • The alleged period runs from November 2019 to October 2025 — about 6 years — during which the companies are suspected of jointly controlling prices and supply volumes.
  • The related sales figure is estimated at around 5.8 trillion KRW, meaning the maximum possible fine under current law is about 1.16 trillion KRW (20% of that amount).
  • Notably, the FTC sent its investigation report just about 4 months after starting the probe — a relatively fast pace.

• This case has some special features worth noting. Key characteristics are as follows.

  • The alleged cartel targeted the B2B market, meaning food manufacturers and restaurant businesses — not regular consumers — were the direct victims of higher prices.
  • Since flour is used in a huge range of everyday foods (bread, ramen, snacks, pasta), the cartel indirectly pushed up consumer prices too.
  • The highly concentrated market structure — where just a few large millers control most of the supply — is identified as the structural condition that made a long-running cartel possible.
  • Given the government's strong focus on price stability, analysts expect the FTC may expand its investigations into other food ingredient markets as well.

📕 Key Legal and Policy Questions

• Proving that there was a real agreement — not just similar behavior — is the central challenge. Key issues are as follows.

  • Under the Fair Trade Act, it is not enough to show that companies had similar prices. Investigators must prove there was an actual agreement to coordinate.
  • If 7 companies matched their behavior consistently over 6 years, many experts believe this is strong circumstantial evidence of collusion rather than independent decision-making.
  • However, the companies are likely to argue that each one simply adjusted prices on its own based on raw material costs and market conditions.
  • Proving with hard data that consumers and food businesses actually suffered financial harm is another important challenge.

• Procedural issues and potential ripple effects are also being watched closely. Key points are as follows.

  • After receiving the investigation report, the companies have the right to submit a rebuttal. The case is still at the "allegation" stage until the final ruling.
  • If the maximum fine is confirmed, it would be the largest fine in Korean fair trade history — sending a powerful warning to other industries.
  • Food manufacturers and restaurant companies that were harmed may also file civil lawsuits for damages.
  • This case may trigger similar FTC investigations into other food ingredient markets beyond flour.

💡 Key Issues in This Case

1. Proving the agreement: Was 6 years of matching prices and volumes a coincidence or a secret deal?
2. Market concentration: Did the 88%-controlled oligopoly create the conditions for a cartel?
3. Size of the fine: A potential record-breaking fine of up to 1.16 trillion KRW
4. Civil liability: Will harmed businesses sue for damages?
5. Broader investigation: Will the FTC expand its probe to other food ingredient markets?

3️⃣ How to Improve the System

✅ Stronger Monitoring and Cartel Prevention

• The government needs a permanent monitoring system for markets dominated by a few companies. Key directions are as follows.

  • The FTC should introduce regular, systematic monitoring of oligopoly industries where just a few firms control the market.
  • Big data tools and price pattern analysis can help detect long-running cartels much earlier than traditional investigations allow.
  • Food staples, energy, and other markets that directly affect daily living costs should be designated as priority monitoring targets.
  • In the long run, encouraging new competitors to enter concentrated markets is the most effective way to prevent cartels from forming.

• The leniency program (self-reporting system) needs to be made more effective. Key tasks are as follows.

  • The leniency program — which reduces fines for companies that come forward and report a cartel — should offer stronger incentives to encourage reporting.
  • Whistleblower reward programs for employees and harmed businesses should be expanded to create more channels for exposing cartels.
  • Better protections for informants inside cartel-participating companies should be put in place to encourage voluntary disclosure.
  • Simplifying the leniency application process and making outcomes more predictable will help the program actually work in practice.

✅ Making Fines an Effective Deterrent

• Fines must be strong enough to genuinely deter future cartels. Key directions are as follows.
  • The current maximum fine of 20% of related sales should be reviewed and potentially linked more directly to the actual illegal profits companies gained.
  • The process of contesting fines through long lawsuits should be streamlined so that companies cannot simply delay payment for years.
  • Criminal penalties for individual executives involved in cartels should be strengthened so that personal accountability is real and meaningful.
  • Class action lawsuit mechanisms should be improved so that harmed consumers and businesses can more easily recover damages.

4️⃣ Key Terms Explained

🔎 The Fair Trade Act (Monopoly Regulation and Fair Trade Act)

• The Fair Trade Act is South Korea's core law protecting free and fair competition in the marketplace.
  • The Fair Trade Act prohibits unfair joint acts (cartels), abuse of market dominance, and other unfair trade practices. Its purpose is to protect and promote free competition so that markets work fairly for both businesses and consumers. The Fair Trade Commission (FTC) is the government agency responsible for enforcing this law.
  • Regarding cartels specifically, the law treats as illegal any agreement between companies that substantially limits competition — whether on prices, supply volumes, market territories, or trading terms. Importantly, there does not need to be a written agreement; a de facto joint action is enough for the law to apply.
  • The FTC can order companies to correct their behavior, impose fines (과징금), and refer cases to prosecutors for criminal charges. Fines are calculated based on the revenue linked to the illegal activity and can reach up to 20%. Companies that self-report receive reduced fines under the leniency program.

🔎 Oligopoly Market

• An oligopoly is a market where a small number of companies control most of the supply.
  • Unlike a monopoly — where one company controls everything — an oligopoly is a market shared by just a few large players. The Korean flour market, where 7 companies hold 88% of sales, is a classic example of an oligopoly.
  • In an oligopoly, because there are so few players, companies can easily watch each other's pricing and production decisions. This makes it easy for "tacit collusion" to develop — where one company raises its price and others quietly follow — even without any explicit agreement.
  • Competition authorities treat industries with high market concentration as priority monitoring targets. Policies that lower barriers to entry and encourage new competitors to enter the market are the most effective long-term solutions to the problems created by oligopolies.

🔎 Administrative Fine (과징금)

• An administrative fine is a financial penalty imposed by a government agency for breaking the law.
  • An administrative fine is a monetary penalty that a government agency (like the FTC) imposes on a company that has violated the law. Its purpose is to take back the illegal profits a company gained and to discourage future violations. It is imposed as an administrative measure — separate from any criminal prosecution.
  • For cartel cases, the fine is calculated based on the sales revenue directly linked to the illegal activity. Under current law, it can be up to 20% of that revenue. The exact amount depends on factors such as the seriousness of the violation, how long it lasted, the impact on the market, and whether the company self-reported.
  • In this case, applying 20% to the estimated related sales of 5.8 trillion KRW gives a maximum possible fine of about 1.16 trillion KRW. This would be a record-breaking fine in Korean fair trade history, designed to make the penalty large enough to truly deter future cartels. That said, companies can challenge the fine through administrative lawsuits, which means the final outcome may take considerable time.

🔎 Investigation Report and Review Process

• Receiving an investigation report from the FTC signals that the formal review process has officially begun.
  • An investigation report is a document prepared by FTC investigators that summarizes the findings of their probe, their assessment of whether the law was violated, and their recommended penalties. Once this report is sent to the companies under investigation, the formal review process officially starts.
  • The review process works as follows. First, FTC investigators finalize the investigation report and send it to the companies (called "respondents"). Second, the respondents submit a written rebuttal challenging the findings. Third, the FTC's full commission or a smaller panel holds a hearing to listen to arguments from both sides. Fourth, the commission issues a final decision — determining whether a violation occurred and what the penalty will be.
  • It is important to understand that receiving an investigation report does not mean the companies have already been found guilty. Until the final ruling is issued, the companies remain at the "allegation" stage and have full rights to defend themselves. If they disagree with the final ruling, they can file an administrative lawsuit in court.

5️⃣ Frequently Asked Questions (FAQ)

Q: Does this mean we were paying too much for flour-based foods?

A: If the cartel is proven, it is likely that food companies — and indirectly consumers — were paying more than they should have.

• A cartel artificially keeps prices higher than they would be in a competitive market. Because flour is a key ingredient in bread, ramen, snacks, and pasta, a cartel in flour means food manufacturers had to pay inflated raw material costs — which they would typically pass on to consumers through higher product prices.
• That said, the case is still at the allegation stage, and no guilt has been confirmed yet. A final decision requires the FTC's formal ruling and, if challenged, a court judgment. If the cartel is ultimately proven and harm is confirmed, the food companies that were overcharged can sue for damages, and some of those costs that were passed on to consumers may be indirectly recovered as well.

Q: Can companies that report themselves get a reduced fine?

A: Yes — under the leniency program, companies that self-report can receive significantly reduced fines.

• The leniency program (called "리니언시" in Korean) allows companies that participated in a cartel to come forward voluntarily and cooperate with the FTC investigation in exchange for reduced or eliminated fines. Under the Fair Trade Act, the first company to report can have its fine fully waived, the second can receive a 50% reduction, and the third can receive a 30% reduction.
• The logic behind this system is to make cartel members distrust each other. Each company faces the fear: "If I don't report first, another company might — and then I'll be the one paying the full fine while they get off." This mutual distrust destabilizes cartels and encourages reporting. On the flip side, the longer a cartel runs, the larger the potential penalty if it is discovered. So if a company has been involved in a cartel, consulting a legal expert early to decide the best course of action is critical.

Q: How does this case affect my daily life?

A: The direct, immediate impact on your daily life is small — but this case matters for ensuring fair competition in the food market that you rely on every day.

• This case involves a B2B (business-to-business) cartel — meaning the direct victims were food manufacturers and restaurant operators, not individual consumers buying flour at the supermarket. However, if food companies were paying artificially inflated flour prices for years, some of that extra cost was likely passed on to consumers through higher prices on processed foods like bread, ramen, and snacks.
• More broadly, this case is a reminder of how important fair competition is for everyday consumers. When companies truly compete, quality goes up and prices come down. When they secretly collude, consumers unknowingly pay more. The FTC's active enforcement and tough penalties are essential for keeping the food market — and markets in general — honest and fair. The outcome of this review could set an important precedent for how the fair trade rules apply across the entire food ingredient industry.

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