South Korean prosecutors are escalating an antitrust investigation into the nation’s flour-milling industry, a case that is increasingly seen as part of a broader government effort to stabilize consumer prices rather than a narrow pursuit of corporate wrongdoing.
At the heart of the probe is whether leading flour producers coordinated the timing and scale of price increases and managed supply volumes in ways that curtailed competition. Authorities believe such conduct may have magnified inflationary pressures in flour, a core input for bread, noodles and a wide range of processed foods. Transactions tied to the alleged coordination are estimated to exceed $2.7 billion, making the case the largest of its kind in nearly 20 years.
The investigation has continued to gather momentum despite a recent court decision declining to detain senior executives from Daehan Flour Mills and Sajo DongAwon. The Seoul Central District Court rejected arrest warrants for four current and former executives, citing their cooperation with investigators and the absence of a need for pretrial detention. Legal experts emphasized that the ruling addressed custody rather than culpability, leaving the door open to indictments and significant administrative penalties.
Prosecutors have since broadened the inquiry to encompass all major members of the Korea Flour Mills Association. In addition to Daehan Flour Mills and Sajo DongAwon, the investigation now includes CJ CheilJedang, Daesun Flour Mills, Samyang Corporation, Samhwa Flour Mills and Hantop. Authorities are examining whether near-simultaneous price moves reflected independent responses to rising raw-material costs or whether tacit coordination or information-sharing played a role.
The political backdrop has sharpened scrutiny of the case. In December, President Lee Jae-myung instructed senior officials to closely examine instances in which companies may have raised prices unfairly through collusion or exploited market dominance to extract excessive profits. The directive, issued amid persistent concern over household living costs, is widely viewed as accelerating enforcement in sectors closely tied to consumer inflation.
The flour industry has emerged as an early test of that policy stance. Dominated by a small number of suppliers providing an upstream input used across the food economy, the sector illustrates how even limited coordination in a concentrated market can ripple through downstream prices, complicating inflation-control efforts.
Legal analysts note that the investigation is unfolding under a tougher regulatory regime. Amendments to South Korea’s Fair Trade Act in 2020 expanded the definition of collusion to include exchanges of competitively sensitive information, lowering the bar for enforcement and shifting more of the burden onto companies to demonstrate that similar pricing decisions were made independently.
Food-industry executives say the case is being closely watched, as its breadth and intensity raise questions about how routine pricing decisions and cost discussions may be interpreted by regulators going forward.
For flour producers, the probe has ushered in a period of uncertainty. Pricing strategies that once attracted little attention are now subject to heightened scrutiny, as authorities reexamine how recent price increases were determined in a sector that sits at the foundation of South Korea’s food supply.
