FKCCI Proposes Three Major Measures to Protect Companies in Fair Trade Cases

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[Asia Economy Reporter Park Sun-mi] There has been a call to strengthen various legal measures that ensure an equal relationship between the competition authority (Fair Trade Commission) and the respondent (company) and protect the rights of companies in the fair trade case handling procedures.

On the 25th, the Federation of Korean Industries (FKI) commissioned Professor Hong Dae-sik of Sogang University Law School to conduct a study on strengthening protection measures for respondents in fair trade case handling procedures, and announced that it derived improvement plans through a comparison with the United States and the EU, where procedural guarantees are well established.

First, it was suggested that, like in the US and EU, forced investigations should be prohibited during preliminary investigations. The US and EU divide competition authority investigations into ‘preliminary investigation - formal investigation,’ and only enforce investigations during the formal investigation. In contrast, Korea imposes legal sanctions such as criminal penalties and compliance fines on respondents who refuse to cooperate regardless of whether it is a preliminary or formal investigation, effectively conducting forced investigations.

Preliminary investigations occur before the formal investigation, which begins with the Fair Trade Commission examiner’s ‘case review commencement report,’ and are closer to ‘internal inquiries’ than investigations. Nevertheless, the Fair Trade Commission conducts document submission requests and on-site investigations during preliminary investigations just as in formal investigations. Like the US and EU, Korea needs to clearly distinguish between preliminary and formal investigations and convert preliminary investigations into voluntary investigations rather than forced ones.

The FKI also stated that a mandatory decision on the investigation before the start of forced investigations and allowing respondents to appeal (objections and court petitions) should be permitted. The US and EU require a mandatory decision by the competition authority before forced investigations. Since the basis for forced investigations is a ‘commission decision,’ respondents are allowed to appeal (objections, court petitions) against that decision. In contrast, Korea conducts investigations without a commission decision. Forced investigations without a commission decision are merely factual acts by officials, so respondents are not allowed to appeal.

It was also argued that compliance materials for legal adherence should not be used as evidence to avoid discouraging companies’ voluntary compliance activities. The US and EU protect the confidentiality of communications between respondents and their lawyers for legal advice. In contrast, Korea does not limit the scope of evidence collection during Fair Trade Commission investigations. Accordingly, the Fair Trade Commission collects not only materials from specific business departments suspected of legal violations but also materials prepared by internal fair trade teams and legal teams for the purpose of preventing legal violations and uses them as evidence of wrongdoing.

Yoo Hwan-ik, head of the FKI’s Industrial Headquarters, said, “Fair Trade Commission investigations and commission deliberations and resolutions target acts such as preferential treatment of related parties and collusion that lead to severe penalties, which impose a heavy burden on companies. Moreover, the initiation of a Fair Trade Commission investigation itself can lead to a loss of trust in the company, a decline in brand value, and negatively affect sales and stock prices.” He added, “It is necessary to strengthen various legal measures that guarantee the rights of respondents and to conduct investigations clearly and transparently accordingly to increase the predictability for respondents.”

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