as unfair trade practice and prohibited under Article 23(1) subparagraph 3 of the MRFTA; (ii)
customer luring by providing gifts and vouchers is prohibited as a special unfair trade
practice, categorized in the separate provisions; and last (iii) luring customer by the false
labeling and advertisement is regulated by the Fair Labeling and Advertising Act. Therefore,
the provision on the case of luring customer by promising unjustifiable gains is only applied
to a situation of providing benefits other than gifts and vouchers and that on the case of luring
customer by superior position refers to the case of other fraudulent means, excluding false
labeling and advertisement.
In the free market economy, efforts to lure competitors’ customers to deal with an enterprise
concerned are of course fully understandable. However, if such practice is not based on price,
quality, or service but on the merely unfair or against normal business practice, it is likely to
hinder fair competition in the market. For this reason, the MRFTA prohibits such business
practices. Therefore, the MRFTA raises an issue of unfairness of means to lure competitors’
customers, regulating a wide range of unfair trade practices including unfair interference of
customers’ transaction with competitors, provision of excessive benefits to customers, and
using fraudulent means.
In case of unfair customer luring, market dominance based on market share of enterprise
and its market status do not matter. Such luring is often done by an enterprise with no
competitiveness in price or quality and weak market position. In addition, only the unfairness
of anti-competitive method is the main issue so that market definition or anti-competitiveness
in the scrutiny does not need to be analyzed. Since the possibility of luring competitors’
customers is a sufficient condition, actual transaction itself does not matter either.
2. Unfair Customer Luring
1) A Comparative Study from Other Competition Regimes
In the US, the practice to lure customers by using fraudulent means, such as false or
exaggerated advertisement and slander, is prohibited under Section 5 (prohibition of unfair or
deceptive acts or practices in or affecting commerce) of the Federal Trade Commission Act.
In order to show the violation of this provision, the plaintiff does not have to prove that
companies have any intention of deceiving customers or that customers are engaged in
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commerce by such deception. Instead, since such practice affects customers’ decision of
purchase, it is acknowledged to have concerns of deception. In the US, the practice of luring
customers by providing unjustifiable gains is not generally prohibited. However, such as the
price discount, rebate is normally prohibited under the very limited conditions as a
discriminatory or predatory pricing pursuant to the Sherman Act or the Clayton Act.
Under EU competition law, there is no regulation directly prohibiting unfair customer luring. The EU competition authorities provide a number of guidelines13 for customer protection,
and each member state also converts them into its national law. In Germany, according to
Article 5 of the Unfair Competition Prevention Law, any practice of misleading customers by
improper labeling and advertisement is prohibited. This provision is interpreted to have its
purpose in protecting counterparties, especially consumers in transaction.
In particular, the Act on Prohibition of Private Monopolization and Maintenance of Fair
Trade in Japan has very similar legal provisions with those in Korea, such as the legal
provisions on the overall unfair trade practices. Misleading customers with improper quality
and price of products compared to those of competitors is prohibited as unfair trade practice
(No. 8 ‘Deceptive Customer Inducement’ under Designation of Unfair Trade Practices) in
Japan. Moreover, customer inducement by gifts and labeling is distinctively prohibited under
the Act on Preventing Unjustifiable Gifts and Labeling. In addition, besides gifts, customer
inducement by providing unjust benefits is regulated under No. 9 of Designation of Unfair
Trade Practices, stipulating “inducing customers of a competitor to trade with oneself by
offering unjust benefits in light of normal business practices”.
2) The Previous Implementation of Law by the KFTC
Before the pharmaceutical companies’ kickbacks to medical institutions became an issue,
the KFTC had raised a question of excessive financial support for sales promotion provided
by manufacturers to distributors through an exclusive supply contract or an exclusive special
agent agreement. However, signing an exclusive special agent agreement was not prohibited
under the MRFTA. It became a norm practice that a manufacturer provides economic benefits
to a certain extent to sales distributors in exchange for giving up their deal with the