"100% Subsidiary Support Should Be Excluded from Unfair Practices"… FKI Proposes Reform Tasks to Government

Conveying Member Companies' Opinions on Enhancing Food Reinspection Procedures and Excluding Support Activities Among Wholly Owned Subsidiaries from Regulation

[Asia Economy Reporter Sunmi Park]The Federation of Korean Industries (FKI) announced on the 4th that it has identified 155 regulatory reform tasks through collecting opinions from its member companies and proposed them to the Ministry of Economy and Finance. The Ministry of Economy and Finance is organizing and operating the 'Economic Regulatory Innovation Task Force (TF),' a private-sector-led, performance-oriented consultative body aimed at realizing a private, enterprise, and market-centered economy.

The FKI proposed that the system should be improved to allow re-inspection of microorganisms and other items when companies request re-inspection for foods that the Ministry of Food and Drug Safety (MFDS) has judged as non-compliant and ordered to be recalled.

When an administrative agency conducts an inspection on foods sold in the market and issues a non-compliance judgment, the product is recalled, and the MFDS announces the related information on its website and to the media. At this time, if the business operator receives inspection results for the same items from two or more domestic or foreign inspection agencies that differ from the administrative agency's non-compliance judgment, they can request a re-inspection. However, if the inspection target is a microbial specimen, re-inspection requests are not allowed.

Food companies point out that microbial specimens, which are excluded from re-inspection, have a high possibility of errors occurring during specimen collection and transportation, and in fact, many problems have occurred due to errors by inspection agencies. They argue that some microbial tests, which are qualitative tests (positive/negative confirmation) rather than quantitative tests (amount measurement), do not change results over time, so it is unreasonable to categorically exclude them from re-inspection.

The FKI also proposed that the Fair Trade Act, which prohibits transactions under significantly favorable conditions with affiliates, should exclude support activities between 100% parent and subsidiary companies from unfair support acts.

Support for 100% subsidiaries is fundamentally different in nature from support for other affiliates, but competition authorities effectively consider unfair support acts between 100% parent-subsidiary companies as established. Since the subsidiary’s management activities are regarded as identical to the parent company’s management activities and all profits of the subsidiary ultimately belong to the parent company despite separate legal entities, it is reasonable to view support activities for subsidiaries as the same as the parent company’s management activities. In fact, the Korea Fair Trade Commission’s ‘Joint Action Review Standards’ regard 100% parent-subsidiary companies as a single business entity and stipulate that unfair joint actions between them do not apply.

The FKI also proposed excluding equipment used at overseas construction sites from the list of strategic items requiring export permits. According to the Foreign Trade Act, when exporting strategic items, export permits must be obtained from the Ministry of Trade, Industry and Energy or related authorities. The strategic item declaration process takes about 30 days in total, including 15 days for prior judgment and 15 days for export permits, and the processing period may be further delayed if additional documentation is requested.

More than half of the items used at most construction sites fall under strategic item categories. Therefore, to export goods for overseas construction, strategic item judgment and export permits must be obtained. The problem is that the large volume of items and the time and cost burden of prior judgment act as obstacles to entering the overseas construction market.

Yoo Hwan-ik, head of the Industry Division at FKI, said, “The global economic situation is not good and is likely to worsen further,” adding, “The government should resolve the ‘stone in the shoe’ regulations to help companies overcome the difficult economic situation.”

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