Alleged Unfair Trade Practices by Multinational Veterinary Pharmaceutical Company

A multinational veterinary pharmaceutical company (“Supplier”) entered into an exclusive distribution agreement (“Agreement”) with a Korean distributor (“Distributor”) and conducted business with the Distributor under the terms of the agreement until the Distributor changed its corporate governance structure. Following the change in the Distributor’s corporate governance structure, the Supplier terminated the exclusive distribution agreement based on the terms and conditions of the Agreement. The KFTC conducted an investigation into alleged violations of the MRFTA and Fair Agency Transactions Act (“Agency Act”) by the Supplier related to the following issues (i) the termination of the Agreement by the Supplier based on the change in the corporate governance structure of the Distributor, (ii) clauses on termination, the obligation to provide the Distributor a list of customers and records of transactions, and (iii) penalties for failing to meet minimum sales targets.    

Lee & Ko’s Antitrust & Competition Group addressed the issues raised by the KFTC asserting (i) the dispute is a private contractual matter between the parties and the Distributor is requesting financial compensation from the Supplier for exercising its rights under the Agreement, (ii) the Distributor was fully aware of the terms and conditions of the Agreement and exercised its own free will in entering into the Agreement so the Supplier was not in a superior bargaining position, and (iii) due to the nature of the Agreement and in supplying veterinary pharmaceutical products, the Supplier offered reasonable explanations for the clauses in question. Lee & Ko’s proactive approach to the investigation resulted in the Supplier being cleared of suspicions of violating the MRFTA and Agency Act.