Hello, this is attorney Eom Sang-yun of Cheongchul Law Firm.

So-called "resale price maintenance" (RPM) - where a supplier sets a fixed sales price for the distributors or retailers handling its products and compels them to comply - is conduct that directly restricts price competition at the distribution stage, and the Monopoly Regulation and Fair Trade Act (hereinafter the "Fair Trade Act") prohibits it in principle. In practice, however, cases continually arise in which manufacturers indirectly or directly intervene in distributors' pricing decisions under the guise of indicating and managing a "manufacturer's suggested retail price," maintaining brand image, or preventing cutthroat competition. It is therefore critical to determine up to what point conduct constitutes lawful price management and from what point it becomes unlawful price coercion.

Against this backdrop, on May 26, 2026, the Korea Fair Trade Commission (KFTC) found that a pharmacy-exclusive health functional food distributor had, for approximately eight years, designated and compelled sales prices toward pharmacies, holding this to constitute resale price maintenance under Article 46 of the Fair Trade Act, and imposed a corrective order (a prospective cease-and-desist order and an order to notify the trading pharmacies). Today we will examine the specifics of this disposition together with the unlawfulness test for RPM established by the Supreme Court, as well as the practical implications that manufacturers and suppliers should bear in mind.

RPM regulation under Fair Trade Act Article 46 and the Supreme Court's test

Article 2(20) of the Fair Trade Act defines resale price maintenance as "conduct in which a business operator, when transacting goods or services, sets a transaction price toward the counterparty operator or operators at each subsequent transaction stage and compels sale or supply at that price, or attaches other binding conditions requiring sale or supply at that price," and Article 46 (main text) prohibits such conduct. However, the proviso, subparagraph 1 of the same Article exceptionally permits it "where there is a justifiable reason for the resale price maintenance, such as where the consumer welfare gains from efficiency improvements outweigh the harm from restriction of competition."

Meanwhile, in a case where a golf-equipment importer and seller prohibited its agencies from selling below a certain price and imposed disadvantages such as suspension of dealings on agencies that violated this, the Supreme Court held that even minimum resale price maintenance is exceptionally permitted where there is a justifiable reason, and the burden of proving the existence of such a justifiable reason rests on the business operator asserting it (Judgment 2010Du9976 / 2010두9976 판결). In other words, minimum RPM cannot be regarded as unlawful per se, and its unlawfulness must be assessed under the "rule of reason."

The specific factors for assessing a "justifiable reason" presented by the Supreme Court in that judgment are: (i) whether inter-brand competition in the relevant market is active; (ii) whether the conduct promotes non-price service competition by distributors toward consumers; (iii) whether consumers' product choices are diversified; and (iv) whether new entrants can readily secure distribution networks and easily enter the relevant product market. These circumstances must be comprehensively considered to assess whether the conduct ultimately enhances consumer welfare. However, since that judgment, the KFTC and the lower courts have tended to review the "justifiable reasons" asserted by business operators very strictly, and general benefits such as merely stabilizing price competition or preventing cutthroat competition are not recognized as justifiable reasons.

Background of this case and the unlawfulness assessment

Company A, a pharmacy health food distributor, is a membership-based health functional food seller that distributes its products solely through pharmacies. From around October 2017 to around August 2025, for approximately eight years, it designated the consumer sales prices of its products through members-only shopping mall notices, website banners, group text messages, and KakaoTalk open chat rooms, and compelled trading pharmacies to comply. A defined (i) discount sales, (ii) the giving of free gifts (so-called "throwing in extras"), (iii) online sales, and (iv) supply to non-trading outlets as "abnormal sales," and continuously pressured pharmacies to sell at the list price.

Particularly noteworthy in this case are the means A mobilized to detect violations. According to the KFTC press release, A (i) urged trading pharmacies to report pharmacies engaging in abnormal sales; (ii) upon receiving a report, conducted secret evaluations using so-called "mystery shoppers"; and (iii) where its products were sold at a discount by non-trading outlets or online, traced the product's barcode or radio-frequency identification code (RFID) to track back the pharmacy that had supplied the product to that outlet. Through such monitoring, detected pharmacies were subjected to staged sanctions - a first warning, then a second-stage supply cutoff - and during this period at least 75 pharmacies were confirmed to have actually been sanctioned.

Regarding such conduct, the KFTC found that, although the pharmacies trading with A are independent business operators who should be able to determine sales prices autonomously, A set consumer sales prices against the pharmacies' free will and compelled compliance, thereby restricting price competition at the distribution stage and infringing the operators' autonomy, and concluded that this conduct constitutes resale price maintenance under Article 46 of the Fair Trade Act. While whether a "justifiable reason" under the proviso to Article 46 is recognized could also be at issue in this case, A's such intense monitoring-and-sanction system appears structurally difficult to combine with the justifying grounds - such as "promotion of service competition" or "enhancement of consumer welfare" - presented in the Supreme Court precedent above, and the KFTC appears to have taken these circumstances into account.

Practical implications

The legal reasoning of the above disposition and the related Supreme Court judgment provides the following practical implications for manufacturers and suppliers in managing their distribution structures.

First, manufacturers and suppliers need a clear understanding of the lawfulness of the price-management means available to them. The mere indication and notice of a "manufacturer's suggested retail price" is not in itself assessed as unlawful price coercion; however, imposing disadvantages - such as suspension of dealings, volume restrictions, or withdrawal of incentives - on counterparties that fail to comply, or building and operating an active monitoring system to police violations, is highly likely to be assessed as resale price maintenance, as in this case. In particular, it should be noted that the means mobilized in this case - mystery shoppers, barcode and RFID tracing, and public disclosure of sanctioned pharmacies via group chat rooms - operated as circumstances that strongly inferred an intent to coerce prices.

Next, recognition of a "justifiable reason" under the proviso to Article 46 of the Fair Trade Act is very limited in practice. Despite the Supreme Court's introduction of the rule of reason in Judgment 2010Du9976 (2010두9976 판결), the KFTC and the courts have since strictly reviewed the "justifiable reasons" asserted by business operators, and instances of recognition are almost never found. Accordingly, rather than relying on a defense strategy of asserting a "justifiable reason" after the fact, it is a far safer response for manufacturers and suppliers to design, in advance, a transaction structure that does not infringe the counterparty's pricing autonomy.

Furthermore, the level of sanctions for resale price maintenance is by no means light. Article 49 of the Fair Trade Act provides for corrective measures against violating operators, and Article 50 provides for the imposition of a surcharge of up to 4% of the relevant sales revenue, or up to KRW 1 billion where there is no sales revenue or its calculation is difficult. While resale price maintenance itself is excluded from criminal punishment, failure to comply with a corrective order may separately become subject to criminal punishment, and it should be noted that the larger the scale of sales during the violation period, the more sharply the surcharge level may increase. While the present case was reported to have ended with only a corrective order, there is ample possibility that surcharges may also be imposed in identical or similar future cases.