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On December 27, 2023, on behalf of the Korea Fair Trade Commission (“KFTC”), Lin won an enforcement injunction case filed by the Korea Music Copyright Association (the “Applicant”) against KFTC in the Seoul High Court.
1. Corrective Order and Fine Imposed by KFTC
KFTC issued a corrective order and imposed a fine of KRW 375,000,000 on the Applicant for abusing its position as a copyright holder by charging and collecting excessive broadcasting fees from broadcasters, thereby making it difficult for competitors to collect broadcasting fees. In response, the Applicant filed a lawsuit seeking the suspension of execution of the above order and fine and an application for an enforcement order.
2. Abuse of Dominant Market Position
After dominating the music copyright management service market since 1988, the Applicant, starting from the third quarter of 2015, had to collect broadcasting royalties divided according to the music composition management fee rate, as stipulated by the Music Composition Usage Fee Collection Regulations, due to the new entry of the same copyright management entity, The Korean Society of Composers, Authors and Publishers (“KOSCAP”).
However, due to the impossibility of calculating an accurate management ratio, the Applicant charged and collected broadcasting fees from a total of 59 broadcasters, including KBS and MBC, using either the same management ratio that the Applicant had previously applied when collecting broadcasting fees exclusively, or an arbitrarily excessive management ratio.
The Applicant filed civil lawsuits against broadcasters who paid only a portion of the broadcasting royalties it arbitrarily overestimated, and pressured some system operators or satellite broadcasters that did not accept the arbitrarily set broadcasting royalties by prohibiting the use of the musical works or threatening them with increased royalties and criminal charges.
In addition, due to the Applicant's actions, KOSCAP had difficulty billing and collecting broadcasting fees from other broadcasters, and some broadcasters did not pay KOSCAP at all, resulting in KOSCAP recording net losses since its inception.
KFTC concluded that the Applicant's conduct had the effect of restricting competition by blocking the business expansion opportunities of its competitors and discouraging innovation in broadcasting license fee collection methods, and therefore, the Applicant abused its market dominant position by making it difficult for its competitors to conduct business.
Furthermore, KFTC deemed that the Applicant engaged in unfair trade practices by imposing excessive broadcasting royalties, applying arbitrary management fee rates to broadcasting companies, and collecting them. The Applicant was seen as engaging in unfair trade practices by abusing its position in transactions to force economic benefits upon its trading partners.
3. Stay of Execution Applied by the Applicant
In this case, the Applicant did not seek a stay of execution for the penalty surcharges but instead sought a stay of execution for the corrective order and notice order. The argument was made on the grounds that the corrective order is not practically achievable, and if the notice order is issued, irreparable damage to the tarnished reputation would occur.
4. Lin’s Defense Strategies
In this case, Lin argued that:
① The focus should be on whether the conditions for a stay of execution have been met. The argument is that the corrective order, instructing the Applicant to carry out normal collection, can by no means be considered impracticable;
② The factors raised by the Applicant are not deemed as actual damages. Even if they were considered damages, they would be pecuniary losses that could be compensated. Thus, there is no urgent need for preventive measures against irreparable damages that would be difficult for the Applicant to recover; and
③ Regarding KFTC’s corrective order, the Applicant presented a specific logical response, asserting that if they apply a reasonable management fee rate and collect broadcasting royalties accordingly, the external image, credit, and reputation with respect to the broadcasting companies, their trading partners, will be further improved. This argument was actively presented to the court with rational grounds.
5. Seoul High Court’s Dismissal Decision
The Seoul High Court accepted all arguments presented by the respondent and dismissed the Applicant’s request for a stay of execution. The court concluded that, based solely on the evidence submitted by the Applicant, there is no imminent risk of irreparable damage to the Applicant due to the disposition specified in the application, nor is there an urgent need to suspend the effect of the disposition to prevent such damage.
6. Implications
This case is noteworthy as the first instance in which KFTC sanctioned an abuse of market dominant position in the field of copyright. Particularly, in a fair trade case where there is a high rate of approval for stay of execution requests, this decision is of significant importance, as it was reached through in-depth analysis of the Fair Trade Act and intellectual property rights, leading to the rejection of the application.
1. Corrective Order and Fine Imposed by KFTC
KFTC issued a corrective order and imposed a fine of KRW 375,000,000 on the Applicant for abusing its position as a copyright holder by charging and collecting excessive broadcasting fees from broadcasters, thereby making it difficult for competitors to collect broadcasting fees. In response, the Applicant filed a lawsuit seeking the suspension of execution of the above order and fine and an application for an enforcement order.
2. Abuse of Dominant Market Position
After dominating the music copyright management service market since 1988, the Applicant, starting from the third quarter of 2015, had to collect broadcasting royalties divided according to the music composition management fee rate, as stipulated by the Music Composition Usage Fee Collection Regulations, due to the new entry of the same copyright management entity, The Korean Society of Composers, Authors and Publishers (“KOSCAP”).
However, due to the impossibility of calculating an accurate management ratio, the Applicant charged and collected broadcasting fees from a total of 59 broadcasters, including KBS and MBC, using either the same management ratio that the Applicant had previously applied when collecting broadcasting fees exclusively, or an arbitrarily excessive management ratio.
The Applicant filed civil lawsuits against broadcasters who paid only a portion of the broadcasting royalties it arbitrarily overestimated, and pressured some system operators or satellite broadcasters that did not accept the arbitrarily set broadcasting royalties by prohibiting the use of the musical works or threatening them with increased royalties and criminal charges.
In addition, due to the Applicant's actions, KOSCAP had difficulty billing and collecting broadcasting fees from other broadcasters, and some broadcasters did not pay KOSCAP at all, resulting in KOSCAP recording net losses since its inception.
KFTC concluded that the Applicant's conduct had the effect of restricting competition by blocking the business expansion opportunities of its competitors and discouraging innovation in broadcasting license fee collection methods, and therefore, the Applicant abused its market dominant position by making it difficult for its competitors to conduct business.
Furthermore, KFTC deemed that the Applicant engaged in unfair trade practices by imposing excessive broadcasting royalties, applying arbitrary management fee rates to broadcasting companies, and collecting them. The Applicant was seen as engaging in unfair trade practices by abusing its position in transactions to force economic benefits upon its trading partners.
3. Stay of Execution Applied by the Applicant
In this case, the Applicant did not seek a stay of execution for the penalty surcharges but instead sought a stay of execution for the corrective order and notice order. The argument was made on the grounds that the corrective order is not practically achievable, and if the notice order is issued, irreparable damage to the tarnished reputation would occur.
4. Lin’s Defense Strategies
In this case, Lin argued that:
① The focus should be on whether the conditions for a stay of execution have been met. The argument is that the corrective order, instructing the Applicant to carry out normal collection, can by no means be considered impracticable;
② The factors raised by the Applicant are not deemed as actual damages. Even if they were considered damages, they would be pecuniary losses that could be compensated. Thus, there is no urgent need for preventive measures against irreparable damages that would be difficult for the Applicant to recover; and
③ Regarding KFTC’s corrective order, the Applicant presented a specific logical response, asserting that if they apply a reasonable management fee rate and collect broadcasting royalties accordingly, the external image, credit, and reputation with respect to the broadcasting companies, their trading partners, will be further improved. This argument was actively presented to the court with rational grounds.
5. Seoul High Court’s Dismissal Decision
The Seoul High Court accepted all arguments presented by the respondent and dismissed the Applicant’s request for a stay of execution. The court concluded that, based solely on the evidence submitted by the Applicant, there is no imminent risk of irreparable damage to the Applicant due to the disposition specified in the application, nor is there an urgent need to suspend the effect of the disposition to prevent such damage.
6. Implications
This case is noteworthy as the first instance in which KFTC sanctioned an abuse of market dominant position in the field of copyright. Particularly, in a fair trade case where there is a high rate of approval for stay of execution requests, this decision is of significant importance, as it was reached through in-depth analysis of the Fair Trade Act and intellectual property rights, leading to the rejection of the application.
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If you have any questions regarding the above, please do not hesitate to contact Mr. Jong Sik Kim or Mr. Hyeonjun Choi of our Antitrust Team at Lin (Tel. 02-3477-8695).