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May 24, 2012

Korea's National Agricultural Cooperative Federation vs. Korea Fair Trade Commission at Seoul High Court: Antitrust Litigation in Korea

The National Agricultural Cooperative Federation has filed suit against the Korea Fair Trade Commission at the Seoul High Court.  Nonghyup is claiming that the monopoly prevention measures, imposed by the KFTC and Korean law, should not be applied to an organization with a main function of supporting struggling farmers.  What do you think?   The Korea Times reports, in part, that:  
The National Agricultural Cooperative Federation, otherwise known as Nonghyup, said Thursday it had filed a suit against the Fair Trade Commission (FTC) with the Seoul High Court. This comes one month after the FTC prohibited Nonghyup and its affiliates from making equity investments in or offering loan guarantees to one another.

Conglomerates with assets of 5 trillion won ($4.25 billion) or more, including Samsung, LG and Hyundai among others, are subject to the restriction aimed at preventing the distortion of conglomerate governance structures.

As of April 12, Nonghyup had assets of 8.6 trillion won. Nonghyup’s assets jumped sharply early this year after the government invested 5 trillion won into it.

The FTC’s decision is equivalent to a provincial court’s ruling, which means Nonghyup must take the case to an appellate court to overturn it.

Nonghyup counters it should be given an exemption from the restriction, highlighting its activities meant to improve the livelihood of farmers. “We have been struggling with a variety of disadvantages caused by the restriction imposed on April 12,” a Nonghyup official said. “Apart from the suit, we are seeking a court injunction to minimize the side effects of the measure.”

The official complained that the FTC’s decision has put the federation at a great disadvantage in tax benefits and subsidies among others. “Under the restriction, we can no longer receive state funds with which Nonghyup has helped cash-strapped farmers and livestock breeders,” he said.

The federation also faces the risk of losing some 20 billion won since the regulation mandates it to sell its stakes in private equity funds, he added.

The ban on direct investment among affiliates has made it difficult for Nonghyup to establish a new affiliate whose role is supporting farming and livestock industries.

“Without the collection of funds from affiliates, it’s virtually impossible for us to establish any new affiliates,” another official said. “The government invested (5 trillion won) to help us. It eventually crippled us.”

Nonghyup has reportedly launched a campaign calling on lawmakers to revise the law in a way that gives Nonghyup an exemption from the restriction. But many analysts express concerns over the move, saying it can hurt the basic principle of equality under the law.

“If Nonghyup is given an exemption, other federations and interest groups will ask for the same status, which will eventually undercut the entire system,” an FTC official said.

As of Dec. 2011, Nonghyup has nearly 2.44 million farmers as members nationwide. Last year, it was ranked the 9th greatest cooperative among the Global 300 cooperative list by the International Co-operative Alliance. In March, it was spun off into one federation and two holding companies to help increase its effectiveness and competitiveness. 
The complete article may be found at:  Nonghyup vs. FTC

What do you think?
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SeanHayes@ipglegal.com
IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S. www.ipglegal.com