Six Major Pork Suppliers Charged with Price Fixing in South Korea

Six major pork distribution companies have been charged with colluding to raise pork supply prices by at least 20% over a six-year period.

The Seoul Eastern District Prosecutors' Office announced on August 4 that it has indicted six companies, including Dodram Food, Dihus Korea (formerly CJ Feed & Care), Daesung Industrial, Daejeon Chungnam Livestock Association, Bukyeong Livestock Association, and Bodam, along with 12 employees, for violating fair trade laws. The collusion occurred between August 2017 and November 2023 for pork supplied to E-Mart.

However, the fair trade law provisions penalizing price information manipulation were enacted in December 2021, meaning only collusion activities after that date were subject to prosecution.

Prosecutors noted that this is the first time they have charged companies for colluding on information exchange regarding food products. Previously, they had exercised their right to request prosecution from the Fair Trade Commission (FTC), leading to a complaint filed in April and subsequent investigations into nine companies.

Not all nine companies were indicted. While prosecutors determined that all nine participated in the collusion, they excluded companies that had dissolved or cooperated with the FTC investigation, ultimately charging six firms.

Park Hyung-cheol, a prosecutor in the sixth criminal division, held a briefing on the investigation, stating, "The FTC uncovered collusion worth 19 billion won that primarily occurred between 2021 and 2022, but the prosecution revealed additional collusion activities from August 2017 over a six-month period and obstruction of the FTC investigation."

Within three months of launching the investigation, prosecutors discovered that all suppliers to E-Mart had agreed on pork price estimates and exchanged this information weekly during the relevant period.

They confirmed that collusion occurred in both general pork, classified as domestic pork without supplier labels, and branded pork from meat processing companies. Park stated, "An analysis of branded pork supply prices from 2020 to 2023 showed that the prices were nearly identical due to information exchange, and the price fluctuations of general pork were similarly aligned, indicating a price distribution that would be difficult to achieve without such sharing."

The total amount spent by E-Mart on pork from the colluding companies was approximately 1.2 trillion won, totaling 14,200 tons.

The companies began exchanging information to maintain pork supply prices at a certain level after E-Mart decided not to disclose the estimated prices submitted by suppliers to encourage price competition in August 2017. They employed a bidding strategy with minor price differences to avoid detection of their collusion.

When special events or inventory clearance were necessary, they communicated individually to manage prices, but starting in November 2021, they created a secret group chat on Telegram to coordinate supply prices. When a responsible person changed, the successor continued the collusion, and new suppliers also joined the collusion.

During this process, when the FTC conducted on-site investigations into the collusion allegations, prosecutors found evidence that employees systematically destroyed related evidence, such as messenger chat records.

Some companies were found to have involved compliance officers from their legal teams in directing the deletion of electronic records. Prosecutors view this as an obstruction of the investigation and have identified four individuals as the main perpetrators for prosecution.

Park emphasized, "The FTC imposed a fine of 3 billion won on these companies, but without the obstruction of the investigation, the amount could have reached hundreds of billions of won."

This collusion has also impacted inflation. Prosecutors noted, "After the collusion was uncovered in November 2023, the wholesale price of pork rose from 5,134 won per kilogram in 2023 to 5,239 won in 2024, while the price of pork belly at large supermarkets dropped by 25.5% compared to the previous year," indicating that the collusion likely caused retail prices at large supermarkets to rise by at least 20% before the investigation.

Prosecutors stated, "We will continue to actively respond to various fair trade violations that disrupt the national economy in accordance with the law and principles."