Fair Trade Commission to Prosecute Corporate Groups for Deliberate and Significant Violation of Data Submission Requirements

Administrative Notice on the Establishment of the 'Guidelines for Prosecution of Violations of Reporting and Data Submission Obligations Related to Corporate Groups'

Scheduled to be finalized and implemented in June after collecting opinions

[Sejong=Asia Economy Reporter Joo Sang-don] Going forward, the Fair Trade Commission (FTC) will take prosecution measures if large corporations, holding companies, and other corporate groups deliberately violate reporting and data submission obligations. Until now, the FTC has taken prosecution or warning measures on a case-by-case basis, considering intentionality and severity without clear written standards, but this time, more explicit written standards have been established.

On the 9th, the FTC announced that it will administratively notify the draft of the 'Guidelines for Prosecution of Violations of Reporting and Data Submission Obligations Related to Corporate Groups' until the 29th of this month.

There were existing prosecution guidelines for substantive legal violations related to corporate group regulations, such as prohibitions on unfair support acts and mutual shareholding and debt guarantees. However, violations of reporting and data submission obligations related to corporate groups are only subject to criminal penalties under Articles 67 and 68 of the Fair Trade Act, without administrative sanctions such as corrective measures. Therefore, the FTC has decided on prosecution based on intentionality and severity on a case-by-case basis.

Because of this, when the FTC decided not to prosecute in cases involving Shinsegae and Booyoung Group, criticism arose that they were 'lenient,' while recently, when they prosecuted Lee Hae-jin, Global Chief Investment Officer (GIO) of Naver, but the prosecution dismissed the case, controversy over 'excessiveness' emerged.

Accordingly, the FTC has prepared prosecution guidelines to enhance consistency and transparency in law enforcement regarding violations of reporting and data submission obligations related to corporate groups.

The new prosecution guidelines set prosecution criteria based on the actor's awareness of the violation and the seriousness of the violation. Awareness is judged by considering whether the actor recognized the violation at the time of the act and the content, circumstances, and repetitiveness of the act. The degree is classified as significant, considerable, or minor. Seriousness is also classified as significant, considerable, or minor based on the content and effects of the violation and its impact on the operation of policies to curb economic power concentration.

However, since the FTC ultimately judges the degree of awareness and seriousness, which may cause controversy, specific examples are provided. For awareness, cases judged as 'significant' include ▲planned execution of the violation ▲reporting and approving or tacitly allowing falsehoods or omissions in submitted data ▲unjustified refusal to comply with the FTC's data submission request. Cases judged as 'considerable' include ▲omitting or falsely stating companies mostly owned by the submitter or their agent when submitting designated data ▲omitting or falsely stating stock ownership by the same individual when submitting stock ownership data ▲situations where, considering family, transaction, or investment relationships, the actor could reasonably recognize falsehoods or omissions in submitted data ▲having received warnings or higher sanctions from the FTC for the same violation within the past three years. Cases judged as 'minor' include ▲difficulty in inferring the actor's awareness of the violation at the time ▲objective evidence proving the actor did not recognize the possibility of violation at the time ▲minor errors in some data but verifiable facts through other submitted data, making false submission pointless.

The FTC judges whether to prosecute by considering both the degree of the actor's awareness and the seriousness of the violation based on these examples. Prosecution is carried out when awareness is significant or considerable and seriousness is significant. However, prosecution is not pursued when awareness is considerable and seriousness is considerable or minor. If both awareness and seriousness are considerable, prosecution may be considered depending on factors such as voluntary reporting and corporate group affiliation.

No prosecution is made when awareness is minor. However, if it is difficult to verify the actor's awareness and seriousness is significant, the case may be referred to investigative authorities.

An FTC official said, "With the establishment of these prosecution guidelines, the prosecution criteria for procedural violations related to corporate groups will be specified and systematized, enhancing the transparency and reliability of the FTC's law enforcement," adding, "It is expected that awareness of the seriousness of intentional false reporting and data submission by corporate groups will increase, thereby improving compliance."

The FTC plans to finalize and implement the draft in June after sufficiently collecting opinions from stakeholders during the administrative notice period and going through the commission's resolution process.

This content was produced with the assistance of AI translation services.