Strike by the Korean Medical Association physicians leads to the Korea Fair Trade Commission sanctions.
In March 2016, the Korean Medical Association (the "KMA"), an association of more than 100,000 Korean physicians, won a decisive victory over the Korea Fair Trade Commission (the "KFTC") when the Seoul High Court entirely overruled the KFTC's sanctions against the KMA in connection with a general strike of member physicians organized by the KMA. The decision of the lawsuit, where Lee & Ko represented the KMA, is a meaningful one, as the arguments presented in the case covered fundamental matters in Korean competition law such as the reach of the Monopoly Regulations and Fair Trade Act of Korea (the "MRFTA"), the meaning and assessment standards of anti-competitive effects, and the antitrust law as it applies to the medical field.
KMA's March 2014 strike resulted in the KFTC fines in July 2014 for violation of antitrust laws, which was appealed by the KMA in August 2015 to the Seoul High Court.
In early March 2014, the KMA organized a one-day general strike protesting government policy to foster telemedicine and for-profit medical corporations, pursuant to a vote by its general members. More than 8,000 local clinics closed on the day of the general strike, and more than 7,000 doctors nationwide participated, excluding those working in emergency rooms and intensive care. In July 2014, the KFTC levied a KRW 500 million fine on the KMA, on the basis that such general strike was a violation of Article 26 (Prohibited Activities of Enterprisers Organization) of the MRFTA. In its decision, the KFTC reasoned that the general strike improperly restricted competition within the medical services market and also improperly interfered with medical service providers' right to freely operate and provide their services.
In August 2015, the KMA, represented by Lee & Ko, initiated an administrative suit seeking a review of the KFTC's decision. The lawsuit gathered significant interests from the medical and legal fields, as the arguments centered on the reaches of competition law in already heavily regulated field of medicine, and whether competition laws may be applied in general strikes which in reality had the characteristics of a petition.
There were two unfavorable precedents against the KMA, one for another strike by the KMA in 2000, and another strike by the Association of Korean Medicine in 2013.
Several unfavorable precedents had existed against the KMA. First was the case on another general strike lead by the KMA in 2000. In 2000, the KMA conducted a general strike protesting the government's health reforms which sought to separate dispensation and prescription of drugs, which effectively prevented clinics and hospitals from selling drugs. Approximately 75.8% of all clinics and hospitals nationwide (approximately 79.7% of private clinics) participated in the strike, which went on for several weeks. Certain parts of the reforms being protested by the KMA, such as changes to public health insurance terms relating to prescription drugs, had direct financial impact on the KMA's member doctors. In 2003, the Supreme Court of Korea ruled in a unanimous decision that the KMA's general strike in 2000 constitutes illegal collusion in violation of the MRFTA (Supreme Court of Korea, February 20, 2003, Decision 2001du5347).
Second was the case on general strike led by the Association of Korean Medicine (the "AKM"), an association of Korean oriental medicine doctors. The AKM, in protesting classification of certain herbal medicine as prescription drugs by the public health insurance system, led the strike in January 2013. 13,915 oriental medicine doctors, or approximately 71.5% of the AKM's then total of 19,463 members, participated in the strike, as the protested issue on classification of oriental medicine as prescription drugs had direct financial impact on the AKM's members. The Seoul High Court (Seoul High Court, Decision 2015nu1115) and the Supreme Court of Korea (Supreme Court of Korea, Decision 2015du55257), both eventually ruled that the AKM's 2013 general strike was in violation of the MRFTA.
Therefore, the KMA faced an uphill battle in its 2014 lawsuit, given the above unfavorable precedents. Such difficulties were further exacerbated by the public sentiment that the KMA is holding public health hostage in pursuit of financial gains for its members.
Lee & Ko, on behalf of the KMA, presented various arguments and successfully countered the KFTC's position, ultimately leading to a overturn of the KFTC's decision by the Seoul High Court.
Lee & Ko, in arguing on behalf of the KMA, presented arguments that (i) the Noerr-Pennington doctrine, which states that enforcement of the antitrust laws will be limited against private entities for activities which urge government action, even if such actions have anti-competitive effects, would apply, (ii) the 2014 KMA strike is different from the 2000 KMA strike in several ways, and (iii) the anti-competitive effects are limited in an one-day strike which only approximately 20% of the members participated. The KFTC in opposition argued that the strike did have anti-competitive effects and that it adversely affected consumer welfare. The KFTC's argument was based on the facts that the number of patients treated on the day of the strike decreased when compared against the norm, and that patients were inconvenienced when they could not receive treatments on the day of the strike, even if they were able to receive treatment on the day after the strike.
Lee & Ko, in countering the KFTC's position, further argued that consumer welfare was not adversely affected by the strike, and that minor inconveniences experienced by certain consumers cannot be the basis of finding anti-competitive effects. Lee & Ko's arguments focused on the facts that the general strike was announced to the public well in advance, and that irreplaceable and critical medical services such as emergency rooms and intensive care units operated without interruption. Lee & Ko further strengthened its arguments by providing an in-house economic analysis which showed that the strike did not have meaningful effect on the use of medical services by patients, as most patients either used medical service providers not participating in the strike or received medical care during the days following the strike, as they were mostly aware of the strike date in advance. The economic analysis processed tens of millions of nationwide patient treatment data by day, month and year, in reaching its conclusion.
The Seoul High Court, in a decision in March 2016, entirely overruled the KFTC's decision on the basis that (i) the general strike had no effect on competition of the medical service market in terms of price, quantity, quality and other factors, and anti-competitive effects cannot be found purely based on some inconvenience experienced by consumers, and (ii) while the KMA organized the strike pursuant to a general vote by its members, the decision to participate in the strike was an independent decision made by the members themselves, and the KMA did not forcibly induce its members to participate in the strike. (Seoul High Court, Decision 2014nu58824)
The case and the decision are significant in that it presented novel arguments and tested various reaches of the Korean antitrust laws, and the results show the capability of the legal representation.
Lee & Ko's legal and economic professionals successfully presented and argued the matters on behalf of the KMA, ultimately resulting in its victory. The Seoul High Court's decision to overturn the KFTC, in light of the multiple unfavorable precedents, highlights the ingenuity of the arguments presented and the capability of the legal representation. Furthermore, the significance of the case is in its coverage of fundamental matters in Korean competition law such as the reach of the MRFTA, the meaning and assessment standards of anti-competitive effects, and the antitrust law as it applies to highly regulated fields such as medicine. In particular, while the Seoul High Court did not directly adopt the Noerr-Pennington doctrine in its ruling, it seems the principles of the doctrine played a role in assisting the Seoul High Court reach a well-reasoned and logical decision.
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