Sangui Forum: "Criminal Penalties for Fair Trade... Should Shift to Administrative Sanctions Like Restrictions on Holding Companies"

The 5th Fair Competition Forum Held on Day 1
Theme: 'Current Status and Improvement Measures of the Penal System'

Penal provisions requiring improvement under the Fair Trade Act. Photo by Korea Chamber of Commerce and Industry

[Asia Economy Reporter Choi Seoyoon] As the government pushes for improvements in economic penalties, there are claims that some provisions in the penalty system under the Fair Trade Act should be abolished or converted into administrative sanctions.

The Korea Chamber of Commerce and Industry (KCCI) announced on the 1st that it held the "5th Fair Competition Forum" and discussed the "Current Status and Improvement Measures of the Penalty System under the Fair Trade Act."

At the forum, expert panelists included Professor Lee Sang-hyun of Soongsil University, Attorney Choi Han-soon of Law Firm Sejong, Professor Choi Nanseolheon of Yonsei University, Attorney Kim Namsu of Kim & Chang Law Office, and Professor Lee Sun-ok of Chung-Ang University. Economic panelists included Woo Tae-hee, Executive Vice Chairman of KCCI, Lee Hyung-hee, Chairman of SK Supex SV Committee, and executives responsible for fair trade in major companies. Representing the government, Song Sang-min, Director of the Competition Policy Bureau at the Korea Fair Trade Commission, also attended.

◆Cases in Major Countries... Penalties Applied Mainly to Cartels= Professor Lee Sang-hyun, who presented on the topic of penalty application, explained, "Historically, the Fair Trade Act has introduced penalties whenever new behavioral regulations were established, so currently, penalties are broadly applied to most types of conduct. In major countries, there are either no penalty provisions or penalties are imposed only on certain types of conduct such as cartels. Some countries like the United States have penalty provisions beyond cartels, but actual cases of punishment are rare."

Professor Lee added, "Recently, the government has been promoting improvements to economic penalty regulations and announced 32 penalty provisions across 17 laws as the first phase. However, it is regrettable that only three provisions related to the Fair Trade Act, such as violations of reporting obligations for the establishment or conversion of holding companies, were selected as improvement tasks."

Attorney Choi Han-soon stated, "As the era shifted from emphasizing economic efficiency to emphasizing economic justice, it seems there was an inevitable aspect of needing to deploy strong measures like penalties. The Korea Fair Trade Commission should fully consider that penalties should be a last resort when deciding whether to exercise the right to prosecute."

Professor Lee Sun-ok agreed that "the phenomenon of excessive administrative penalties is undesirable," but argued, "Rather than simply comparing the number of penalty provisions under the Fair Trade Act between major countries and Korea, it is necessary to carefully examine the reasons for introducing penalty provisions for violations of the Fair Trade Act, the history, and the functions of penalties, which differ from major countries."

Current Status of Penal Provisions by Major Countries in the Field of Competition Law. Photo by Korea Chamber of Commerce and Industry

◆Presentation of Criteria for Evaluating the Legitimacy of the Penalty System= Professor Lee proposed four evaluation criteria applying general principles of criminal law to assess the legitimacy of penalty provisions under the Fair Trade Act: legality (prohibition of broad delegation), clarity, appropriateness (principles of responsibility and proportionality), and subsidiarity.

Attorney Kim Namsu argued, "For the government's regulatory innovation to be effective, policies need to be promoted in a direction that enhances the clarity of economic penalty provisions. Improving the clarity of economic penalty provisions will enable companies to engage in active business activities, which will greatly help revitalize our economy."

Meanwhile, Professor Choi Nanseolheon agreed with the presented evaluation criteria but emphasized, "In the case of the Fair Trade Act, due to the nature of competition law, additional consideration should be given to the impact on the market and consumers."

Attorney Choi Han-soon also stated, "Unlike traditional criminal offenses, in the field of economic law where interpretation and application may vary depending on temporal and economic circumstances, it is necessary to pay attention to legal maintenance and enforcement to ensure that the general principles of legality are properly implemented."

◆Need to Reexamine Current Penalties= Based on the four principles, Professor Lee argued that "when reviewing the legitimacy of the penalty system under the Fair Trade Act, some types should be decriminalized or converted from criminal sanctions to administrative sanctions such as fines or penalties," suggesting reexamination of violations related to ▲holding company conduct and establishment restrictions ▲failure to submit business reports ▲certain unfair trade practices ▲evasive acts (related to corporate mergers and economic power concentration control).

Attorney Choi Han-soon responded, "It is worth considering administrative sanctions instead of penalties for violations of acts aimed at achieving administrative objectives, distinguishing them from cases that directly infringe on consumer interests and balanced national economic development. It is also necessary to refer to other administrative laws where failure to report or false reporting results in fines."

Professor Choi Nanseolheon further argued, "The issue of maintaining penalties for prohibitions on mutual shareholding, new circular shareholding, debt guarantees, and restrictions on voting rights of financial companies, insurance companies, and public interest corporations should also be reexamined from a mid- to long-term perspective."

Meanwhile, Professor Lee Sun-ok stated, "Simple administrative violations such as failure to report the establishment or conversion of holding companies are appropriate for conversion to administrative regulations. However, since penalties hold the responsible representatives accountable for the violation, whereas administrative sanctions like fines are attributed to the company and may lead to damages to third parties such as shareholders and creditors, it is necessary to carefully examine the practical effects of abolishing penalties."

Woo Tae-hee, Executive Vice Chairman of KCCI who chaired the discussion, said, "The current penalty provisions under the Fair Trade Act are excessively broad compared to major countries. Unreasonable penalty provisions affect corporate competitiveness, so reexamination is needed for simple administrative violations unrelated to public safety or life."

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