Four manufacturers of starch and starch sweeteners, key raw materials for foods such as bread and beverages, have been caught fixing prices for more than seven years, drawing a 747.6 billion won fine and a price-redetermination order from the Fair Trade Commission (FTC). It is the largest fine ever imposed in a cartel case. The FTC has also launched review proceedings into starch sweetener bid-rigging and byproduct price-fixing cases, pursuing additional sanctions.
The FTC said Monday it had imposed corrective orders and a total fine of 747.578 billion won on Daesang, Sajo CPK, Samyang, and CJ CheilJedang for fixing the sales prices of starch and starch sweeteners over seven years and five months, from May 2018 to October 2025.
According to the FTC, the companies jointly decided on price increases and decreases on a total of 13 occasions. When international corn prices rose, they raised prices together to quickly pass on rising cost burdens to clients, and when prices fell, they delayed the timing of reductions or minimized the extent of the cuts. They maximized profits by lowering prices only partially for large clients while maintaining existing prices for smaller clients and distributors. These companies hold a 95.7% share of the domestic B2B market for starch and an 86.4% share for starch sweeteners.
In particular, although the government eased the industry's cost burden by applying a 0% quota tariff on processing corn in response to a surge in international grain prices, the FTC found that the companies continued their collusion during this period by jointly setting the timing of price increases and decreases. As a result, the FTC explained that during the period when international corn prices spiked, starch sweetener sales prices rose by up to 73% compared with May 2018, when the collusion began. Meanwhile, when raw material prices fell, they minimized the extent of price reductions to maintain operating profit, and that burden was passed on to final consumers through clients such as food companies, the FTC determined. The revenue the four starch and starch sweetener manufacturers earned domestically in this way reached 6.0525 trillion won.
The FTC regarded this as a "very serious violation" and imposed a fine of about 747.6 billion won, or 15% of the related revenue. It is the largest fine ever imposed in a cartel case. The previous largest fine was in a flour price-fixing case involving seven companies (671 billion won).
Viewing the likelihood of recurrence as high, the FTC also issued an "independent price-redetermination order," requiring the companies to independently reset their prices. The companies must report price changes to the FTC every half-year for the next three years. The independent price-redetermination order is the fourth to be imposed since it was first invoked in the flour price-fixing case this May. Nam Dong-il, FTC vice chairman, said, "This case involved long-running collusion that had a very significant impact across the market," adding, "Because it is difficult to conclude that the effects of the prices formed through collusion have been fully resolved, we imposed both the independent price-redetermination order and the obligation to report price changes."
Separately from the price-fixing case, the FTC said it had opened review proceedings the same day into starch sweetener bid-rigging and byproduct price-fixing cases. The FTC determined that Daesang, Sajo CPK, Samyang, and CJ CheilJedang, in purchase bids for starch and starch sweeteners placed by seven large end-users from September 2016 to June this year, pre-arranged the intended winning bidders, bid prices, and volumes before dividing up the awarded volumes. The related revenue in this case is 940 billion won.
In addition, Daesang, Sajo CPK, and Samyang were found to have agreed monthly on the sales prices of starch sweetener byproducts such as corn gluten meal, gluten, and germ from August 2017 to October last year. The related revenue was calculated at 1.55 trillion won.
The FTC regarded both cases as serious violations amounting to price-fixing and bid-rigging under the Fair Trade Act, and proposed corrective orders and fines. The maximum expected fines are 188 billion won and 211 billion won, respectively. The final decision on sanctions and the size of the fines will be confirmed through future plenary session reviews.
