Twenty-two people, including employees of three leading domestic companies, have been sent to trial for colluding to fix the prices of starch and sweeteners used in snacks, beverages, milk, and beer, generating roughly 10 trillion won in sales over eight years. It is the largest starch and sweetener collusion on record, and during the collusion period prices of starch and sweeteners rose by up to 73% and 64%, respectively, compared with before.

On the 23rd, the Fair Trade Investigation Department of the Seoul Central District Prosecutors Office (headed by chief prosecutor Na Hee-seok) announced that it had uncovered collusion among four companies that dominate the domestic starch sugar and by-product marketDaesang, Sajo CPK, Samyang, and CJ CheilJedangto fix the prices of starch, sweeteners, and their by-products in the domestic market on a scale of 10.152 trillion won, and that it had indicted a total of 25 people, including the top executives of each, across three starch sugar firms. Among them, Samyang avoided criminal punishment under the leniency program for voluntary self-reporting.

Starch is divided into food grade and industrial grade. Food-grade starch is used as a raw material for secondary processed foods such as snacks, alcoholic beverages, soft drinks, baked goods, and dairy products. Industrial starch becomes a raw material for paper, textiles, and steel, and sweeteners such as glucose·fructose·alternative sugars (including allulose) are used along with food-grade starch as ingredients for processed foods. By-products generated in the production of starch and sweeteners go into corn oil or animal feed.

According to the prosecution, four domestic starch sugar companies including Daesang colluded on starch and sweetener prices from 2017~2025 and earned more than 10 trillion won in sales on a ‘record-breaking scale’ over eight years. By type, general price collusion for starch·sweeteners was found to total 7.298 trillion won, bid-rigging for major end users (Seoul Milk, Korea Yakult, Nongshim, OB Beer, HiteJinro, POSCO, etc.) totaled 1.016 trillion won, and collusion on by-product prices totaled 1.838 trillion won.

As a result of the collusion, starch prices jumped by as much as 73.4% and sweetener prices by as much as 63.8% compared with the pre-collusion period. Their sales rose by an average of 24.5% per year over the same period, and a separate estimate by prosecutors put the damages to consumers and others over the eight years of collusion at 1 trillion~1.93 trillion won.

According to prosecutors, they first engaged in collusion during a July 2017 bidding process for end users, and thereafter expanded the scope of unfair dealings to general price collusion and by-product price collusion until they were caught. The four starch sugar firms also conspired to conceal the collusion by reaching a basic agreement on the timing and magnitude of price adjustments by product category and then setting different proposed price increases·cuts for clients by company.

The prosecution said it expanded the probe after, while investigating a sugar cartel last year, it found that the same companies had also engaged in starch·sweetener collusion. It explained that, for 22 individuals with significant involvement, it cooperated across agencies by exercising its authority to request that the Korea Fair Trade Commission, which holds the exclusive right to file complaints for unfair-trade crimes such as collusion, make referrals. Of the 25 defendants, Kim, head of the Business Division at Daesang Group, was sent to trial while in detention. Arrest warrants sought for Im, CEO of Daesang Group, and Lee, CEO of Sajo CPK, were denied by the court.

Meanwhile, the Korea Fair Trade Commission, which has the authority to impose administrative sanctions such as penalty surcharges, is also conducting a separate investigation into the case. However, prosecutors stressed that criminal punishment of individual executives and employees who committed the acts is essential to deter such collusion. Na Hee-seok, the chief prosecutor, said, “The prosecution, judging that penalty surcharges or fines have no real deterrent effect (an effect of inducing fear to prevent crime) on collusion, exercised its authority to request that the Korea Fair Trade Commission file complaints against individuals with significant involvement.”