South Korean President Park Geun-hye has made corporate regulation a priority in her administration. And the commitment to tackle collusion came on 17 November when the Korea Fair Trade Commission (KFTC) said that it found nine Japanese and German bearing manufacturers operated a cartel to collude on the price of products for more than a decade.
The KFTC fined the manufacturers a total of 77.8 billion won ($77 million) and filed a criminal complaint against them to Korea’s Supreme Prosecutors’ Office.
The collusion was very effective in artificially raising bearing prices. During the collusion period, 1998 – 2012, the price of market grade bearings was 80% – 100% higher in Korea compared to the international price.
During the 90’s Japanese bearing manufacturers established Asia Research Association, to avoid price competition for their bearing products in Asia. Through this cartel, which cooperated with European manufacturers, the companies sough to artificially prop prices in Korea and other Asian countries.
The sanction by the KFTC is a very aggressive stance; although Australia, Singapore and China penalised the Asia Research Association cartel, KTFC was the first to uncover the link between international and domestic price fixing. They were also able to reveal how the price collusion translated to a significantly increased price in Korea. This was the result of a lengthy and far-reaching investigation that lasted over 2 years. One of the longest in the agency’s history. They interviewed more than 35 non-Korean witness and produced a report of over 2,800 pages.
The sanction by the KTFC is the first of its kind against price fixing for large and miniature grade bearings. It also now holds the Korean record for apprehending the longest running criminal scheme.
For more information see The Wall Street Journal.