FKI "The Scope of Relatives in the Fair Trade Act Is Still Broad"... Suggests Improvements to the Fair Trade Commission

"Kinship Range Should Be Reduced to Spouse and Direct Family Members to Align with Public Expectations"

[Asia Economy Reporter Park Sun-mi] There has been a claim that the scope of relatives specified in the Enforcement Decree of the Monopoly Regulation and Fair Trade Act is too broad and should be narrowed down to spouses and direct family members to align with public expectations.

On the 19th, the Federation of Korean Industries (FKI) announced that it submitted economic sector opinions on the government's legislative notice of the Enforcement Decree of the Monopoly Regulation and Fair Trade Act, announced last August, to the Fair Trade Commission. The legislative notice mainly includes ▲adjusting the scope of relatives among persons related to the same individual ▲including common-law spouses among persons related to the same individual ▲principally excluding affiliated companies of controlling companies with outside directors ▲improving the deferral system for incorporating small and medium venture companies into large business groups.

The FKI argued that the legislative notice, which defines the scope of relatives as up to the fourth degree of blood relatives and third degree of relatives by marriage (previously, sixth degree of blood relatives and third degree of relatives by marriage), still does not reflect reality. Even close relatives often have no interaction, so the scope of relatives in the legislative notice is considered too broad.

The FKI also claimed that the provision including fifth and sixth degree blood relatives and fourth degree relatives by marriage as assisting the controlling individual's power, and thus subject to regulation, needs improvement. This is because companies face excessive administrative burdens in verifying whether these distant relatives meet the criteria for assisting control. The FKI proposed narrowing the scope of relatives to ‘the controlling individual's direct ascendants and descendants and spouse and their direct ascendants’ and deleting the provision that exceptionally includes fifth and sixth degree blood relatives and fourth degree relatives by marriage as regulated subjects.

The FKI pointed out that including common-law spouses with biological children as relatives is also problematic. The criteria for establishing a common-law relationship vary case by case and are ambiguous, making it practically impossible for a third party other than the court to make such a judgment.

Furthermore, the FKI proposed deleting the provision that includes common-law spouses as relatives. The legislative notice, which subjects common-law spouses to regulation simply because they are in a common-law relationship, is excessive compared to other laws that regulate only when the common-law spouse holds shares (Basic National Tax Act, Capital Markets Act) or takes on specific legal acts such as becoming an outside director (Commercial Act).

The FKI also proposed excluding outside directors from persons related to the same individual without exception. Since the Commercial Act strictly regulates the qualifications of outside directors and limits their tenure, applying the executive independence requirement again raises concerns about overlapping regulations. Additionally, it is practically impossible to continuously monitor whether the outside director meets the executive independence management requirements.

Yoo Hwan-ik, head of the Industry Division at the FKI, said about the legislative notice, “Some of the improvements requested by the economic sector have been partially reflected, but there still seem to be insufficient parts,” and emphasized, “Economic sector opinions should be actively reflected in line with the purpose of the amendment to reduce corporate burdens and rationalize the large business group system.”

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