Pervasiveness of Price Fixing in Korea: An Analysis of Causal Factors in Comparison with the United States

Abstract

Price fixing is one of the most serious forms of corporate crime, but is rarely recognized as such by the public. For consumers, price fixing has a direct impact, as it raises prices and reduces choices. The scrutiny against, and prosecution of, such anticompetitive practice is important not only to protect the consumer but also to uphold free and open competition in the economy. Even though government administrators and policymakers fittingly perceive the illegality of the practice and its severity, the extent to which anticompetitive legislation is enforced varies greatly from country to country. For example, although South Korea is known to be a country with a relatively high level of cartel activities, its antitrust laws and actual prosecution of corporations engaging in price fixing have been found to be lax. On the other hand, the United States, the nexus of global trade and world markets but also a business-friendly country, is known to have relatively low-level cartel activity. The question is: What accounts for the fact that price fixing scandals have become a pedestrian phenomenon in South Korea? This paper provides a comparative analysis of the nature of price fixing in South Korea and the United States, arguing that price fixing occurs more frequently in Korea because of its lax laws against price fixing, as evidenced by moderate fines and penalties. The paper also identifies the factors that account for the lenient laws against anticompetitive activities in South Korea, and explores ways to improve mechanisms to deter those activities.