Six South Korean flour milling companies have been referred to the Fair Trade Commission's adjudication process on allegations that they fixed prices of wheat milling byproducts used as animal feed ingredients for more than eight years. The commission estimates the cartel covered 1.4 trillion won ($1 billion) in sales, meaning fines could reach as much as 210 billion won.
The FTC said on the 14th that it had sent examination reports to six companies — Daehan Flour Mills, Sajo Dongaone, Sajo Daerim, Samyang Corp, CJ CheilJedang and Hantop — and opened deliberations in the wheat byproduct price-fixing case. An examination report lays out the FTC's investigative findings and triggers the Commission's formal deliberation process, similar to a formal charge sheet in an administrative proceeding. Wheat milling byproducts include wheat bran and lower-grade flour generated during flour production, and are mainly used in compound feed for livestock. The six companies account for 78% of the wheat bran market. If the millers raised feed ingredient prices through collusion, the increase could have passed through to compound feed prices and ultimately burdened livestock farms and consumer food prices.
The FTC concluded that the six companies fixed the selling prices of wheat byproduct goods every month for about eight years and six months starting in 2017. Sales affected by the conduct totaled 1.4 trillion won. The commission judged the violation highly serious and recommended corrective orders, fines, and the filing of criminal complaints against the six corporations and their executives and employees. The base rate for fines in the case is 10.5% to 15.0%, which on a simple calculation would allow penalties of up to 210 billion won.
In May this year, seven millers — Daehan Flour Mills, CJ CheilJedang, Sajo Dongaone, Samyang Corp, Daesun Flour Mills, Samhwa Flour Mills and Hantop — were fined 671 billion won for fixing flour prices. Five of them, excluding Daesun Flour Mills and Samhwa Flour Mills, also face allegations of colluding on wheat byproduct prices. "The investigations themselves proceeded at the same time, but in terms of case-handling priority, flour has a greater and more urgent impact on people's daily lives, so it was dealt with first," said Oh Haeng-rok, director general of the FTC's Cartel Investigation Bureau.
Unlike the earlier case, however, the FTC did not include an order to redetermine prices among the corrective measures this time. An FTC official explained that this was "because, unlike flour, it is difficult to say that byproduct prices have been kept very high when economic conditions are taken into account."