Fair Trade Commission Signals Possible Additional Delay in Enforcement Timing Ahead of National Assembly Discussions on the Fair Trade Act

At the Policy Communication Seminar on the 26th

Postponement of Enforcement Timing "Matters to be Discussed in the National Assembly"
Concerns over Duplicate Investigations upon Abolition of Exclusive Prosecution Rights: "Fair Trade Commission-Prosecutor's Office Case Handling Standards, MOU → Legal Specification to be Discussed in the National Assembly"

[Sejong=Asia Economy Reporter Joo Sang-don] Ahead of the full-scale discussion of the Fair Trade Act revision bill in the National Assembly, the Fair Trade Commission (FTC) has hinted at the possibility of amendments on some issues. The current legislative notice specifies the enforcement timing as one year after promulgation, but the FTC has softened its previous stance of "no amendments" by stating that postponing the enforcement timing by 2 to 3 years or legally specifying the priority of investigations (probes) upon abolition of exclusive prosecution rights are "matters to be discussed in the National Assembly."

On the 26th, the FTC held a policy communication seminar on the full revision of the Fair Trade Act at the Government Complex Sejong. This was an occasion for the FTC to explain its jurisdictional issues to reporters.

At the event, Choi Moo-jin, Director of the Competition Policy Bureau at the FTC, responded to concerns from the business community regarding the Fair Trade Act revision by saying, "We have sufficiently explained the utility of the Fair Trade Act revision and the direction and vision for the future market economy order of Korea to many economic organizations," but added, "We will discuss each task and create reasonable alternatives."

Specifically, he mentioned the possibility of postponing the enforcement timing. The legislative notice specifies the enforcement timing of the full revision of the Fair Trade Act as "the day one year after promulgation." When asked about the FTC's position if the National Assembly proposes to delay the enforcement timing by 2 to 3 years during the bill review process, Director Choi replied, "It has not been fully discussed in the National Assembly yet," and "If it is discussed, it seems necessary to discuss the content more internally."

Previously, the FTC had agreed on case handling standards that set the priority of investigations (probes) to prevent overlapping investigations with the prosecution following the abolition of exclusive prosecution rights. However, the business community still expresses concerns about duplicate investigations. Regarding this, Director Choi said, "The priority of law enforcement is a matter to be coordinated between agencies, and I question whether such details should be written into the law," but added, "If this issue is raised during the National Assembly discussions, it should be judged through mutual discussion."

However, the FTC expressed its position that "there will be no amendments to the overall framework of the full revision of the Fair Trade Act." An FTC official explained, "We have already limited voting rights only for existing circular shareholdings of newly designated groups and postponed the restriction on voting rights of public interest corporations by two years to avoid sudden shocks to companies. We have also accepted reasonable alternatives through expert discussions on issues where concerns about side effects have been raised by the business community, such as limiting the abolition of exclusive prosecution rights to hardcore cartels and strengthening regulations only for new holding companies."

On this day, the FTC also refuted the concerns of the business community point by point. The business community worries that the "expansion of the scope of unfair internal transactions regulation" will excessively regulate internal transactions that have advantages such as improved management efficiency through vertical integration, thereby hindering the acquisition of reasonable competitiveness and strategic marketing activities. In response, the FTC emphasized that unfair internal transactions are acts that cause "additional costs" to companies compared to normal transactions for the "benefit of the controlling family," which actually lowers corporate value, and that the unfair internal transactions sanctioned by the FTC are significantly different from acts aimed at improving management efficiency and competitiveness.

Regarding the increase in the mandatory shareholding ratio of subsidiaries and grand-subsidiaries of new holding companies, the FTC explained that if the mandatory shareholding ratio is low, holding companies can easily expand subsidiaries and grand-subsidiaries with small shares and focus on internal transactions to generate income other than dividends. The increase in the mandatory shareholding ratio applies only to new holding companies (including new subsidiaries and grand-subsidiaries of existing holding companies), and the decision to establish or convert a holding company is a matter to be autonomously judged and decided.

Regarding the business community's claims that restricting voting rights of stocks held by public interest corporations hinders their social contribution activities, and that punishing information exchange acts as collusion may punish information exchanges that are not actual collusion, the FTC drew a clear line, calling these "excessive concerns." Since the donation of stocks itself is not prohibited, public interest corporations can sufficiently carry out social contribution projects using dividends from held stocks and proceeds from stock sales. Also, information exchange acts, unlike price collusion, are considered soft cartels and are punishable only when the anti-competitive effect outweighs efficiency gains. Therefore, it is necessary to specifically prove that the information exchange "substantially restricted competition" for sanctions to be possible. Director Choi said, "(In the case of information exchange acts) the harmful effects of competition restriction exist, and the information regulated as exchange restrictions in the enforcement decree will comprehensively consider judgment criteria and existing cases from the U.S., European Union (EU), and others," adding, "Therefore, routine information exchanges that do not cause competition restriction effects or competition-promoting information exchanges that enhance efficiency and consumer welfare are excluded from regulation."

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