products subject to unfair customer luring should determine customers’ choice through such a
business practice, thereby leading to more profits from the increased sales. According to the
plaintiff, intravenous fluid could not be the product, targeting for such unfair trade practice
based on the consideration of its features, supply conditions, and its profit/loss structure. For
this reason, the enterprise argued that the surcharges measured by the KFTC were incorrect.
To be more specific, intravenous fluid is not a medical product for curing disease but is an
essential product for supplementing blood or water for surgeries. Therefore, its usage or
prescription is hardly increased by means of marketing activities to medical institutions. As it
is one of the most basic and essential medical products for public health, it was designated as
the product under the drug shortage prevention program. Its reimbursement price was KRW
1,172 for 1,000 ml of 5% glucose injection (KRW 976 for 500 ml), which was cheaper than
mineral water while its production cost was KRW 1,504.5 for 1,000 ml (KRW 1,198.9 for
500 ml), which was more expensive than the reimbursement price. Therefore, the sale
increase of the product can bring losses to the enterprise. However, the KFTC dismissed5 Choongwae’s argument because of the following reasons:
(i) even though intravenous fluid would trigger loss as a single item, it could help to boost
sales of other medical supplies and products used in the medical institutions concerned; (ii)
despite the current loss, intravenous fluid could generate profits with possible increase of
reimbursed price in the future; (iii) with a condition to exchange competitors’ fluid with its
own fluid for the sales discount in order to defend aggressive marketing activities of
competitors, delivery cost was provided to certain hospitals; (iv) the sales of intravenous fluid
increased a lot in 2007; and (v) even with the fluid, certain portion of sales price was
provided to purchaser in a form of sales incentive, thereby accumulating the points to U-Code,
which was the same sale promotion as other medical products.
In addition, Glaxo raised an objection against the KFTC’s decision in that (i) the supporting
practice concerned was not done with the expectation of its drugs being prescribed, and it was
a legitimate sales activity to increase sales or prescription; and (ii) because the most physical
support to medical institutions was less than KRW 300,000 a year, the enterprise did not give
benefits of excessive amount but to proper and reasonable extent. However, the KFTC also
rejected GSK’s argument since it acknowledged illegality when the practice concerned was
done expecting for reciprocity and the amount was excessive.
5 The KFTC’s Decision No. 2008-009, May 9, 2008.
6
However, in calculating the relevant sale amount of resale price maintenance, the KFTC
acknowledged the fact that some enterprises, including Dong-A Pharmaceutical, directly
provided the products without wholesale distributors. Therefore, it decided that these sales
amount were excluded for surcharge calculation. Considering such complaint as reasonable, the KFTC re-calculated6 the surcharges on this part.
4. The Seoul High Court’s Judgment
Nine out of 10 pharmaceutical companies that received corrective order from the KFTC
filed a lawsuit in the Seoul High Court. Six companies including Green Cross, Yuhan, Dong-
A Pharmaceutical, Ilsung Pharmaceutical, Choongwae Pharmaceutical, and Hanmi
Pharmaceutical received sanctions in the first investigation while other three companies,
including Glaxo, Korea Pfizer and Jeil Pharmaceutical, received the second sanction.
Regarding the result of lawsuit, the KFTC completely won the cases against Dong-A,
Choongwae, Korea Pfizer and Jeil while against the other five companies, the KFTC partially
lost in the several issues, such as calculation of surcharges. However, there is no doubt that
the High Court acknowledged the KFTC’s decision on the illegality of practices by the
enterprises.
At the annulment lawsuit raised by Green Cross and Yuhan, the High Court acknowledged
the fact that the KFTC issued a corrective order for their financial support, such as of
entertainment for doctors, including golf, and product demonstration, without specifying the
practice of their legal violation, and it annulled the KFTC’s decision. In addition, although
the KFTC considered the total sale amount of medical products targeting for companies’
rebate activities as related sales, the High Court decided that their sale to medical institutions
where companies did not directly rebate should not be regarded as the relevant sales; it, thus, reversed the KFTC’s decision of surcharges concerned as well.7
At the annulment lawsuit filed by Glaxo, the High Court denied to regard the company’s
practice as a resale price maintenance since (i) even though the enterprise signed a contract
with the wholesaler and sent the notice letter to restrain sales discount, this practice could be
only regarded as a notice of reference price or recommended price; and (ii) it was difficult to