SEOUL – In a landmark move to curb unfair trade practices in the food industry, South Korea's antitrust watchdog has imposed significant penalties on nine major meat processing companies. The Fair Trade Commission (KFTC) announced on Thursday that it has fined these firms a combined 3.16 billion won ($2.4 million) for conspiring to fix the supply prices of pork delivered to E-Mart, the nation’s largest hypermarket chain.

In addition to the financial penalties, the commission has decided to refer six of these companies—including Daeseong Silup, Dodram Food, and CJ Feed & Care—to the prosecution for further criminal investigation. This marks the first time the KFTC has sanctioned a cartel involving the distribution and supply of pork in the domestic market.

Rigging the System: General vs. Brand Pork
The investigation revealed that the collusion was systematically carried out across two main categories of pork products sold at E-Mart: "General Pork" (unbranded domestic meat) and "Brand Pork" (premium products with specific livestock labels).

For General Pork, which E-Mart typically procures through a competitive bidding process, eight companies collaborated on 14 separate bidding rounds between November 2021 and February 2022. They reportedly shared sensitive pricing data and agreed on minimum bidding thresholds for popular cuts like pork belly (samgyeopsal) and shoulder butt (moksim). By pre-arranging who would win certain lots and at what price, they effectively neutralized the competitive nature of the auction.

The manipulation extended to Brand Pork as well. Five companies, including Sunjin and FarmStory, were found to have coordinated their price quotes for premium cuts over ten occasions between July 2021 and October 2023. Unlike general meat, brand meat prices are determined through negotiations based on quotes submitted by the processors. By aligning their quotes beforehand, the companies stripped E-Mart of its bargaining power.

Consumer Impact and Regulatory Response
The KFTC emphasized that these backroom deals had a direct and negative impact on household budgets. "When supply prices are artificially inflated through collusion, it inevitably leads to a rise in retail prices," a KFTC official stated. "This burden is passed directly to consumers, who have already been struggling with high food inflation."

The total value of the contracts affected by this price-fixing scheme is estimated to exceed 19 billion won (approx. $14.5 million). Given that pork is a staple protein in the Korean diet, the regulatory body viewed the impact on public welfare as substantial.

The list of sanctioned companies includes:

-Fined and Referred to Prosecution: Daeseong Silup, Daejeon-Chungnam Pig Industry Cooperative, Bukyung Pig Industry Cooperative, CJ Feed & Care, Dodram Food, and Bodam.
-Fined: Sunjin, FarmStory, and Haedrim LPC.

A Warning to the Food Industry
This crackdown is part of a broader initiative by the South Korean government to stabilize the prices of essential goods. The KFTC has signaled that this is only the beginning of its scrutiny into the food and beverage sector.

"We will not loosen our surveillance on cartels that threaten price stability in sectors closely linked to the daily lives of our citizens," the official added. The commission is currently expanding its investigations into potential price-fixing in other essential food categories, including flour, starch sugar, and eggs.

Industry analysts suggest that this ruling will serve as a stern warning to the livestock and meat processing industry, which has long been criticized for its opaque pricing structures. The prosecution's upcoming investigation is expected to delve deeper into whether top-level executives were directly involved in orchestrating the illegal agreements.