Collusion Now Means at Least 10% Surcharge... Fair Trade Commission Drastically Raises Minimums, Cuts Mitigation Benefits in Half

The Fair Trade Commission has unveiled a reform plan for the penalty surcharge system, which significantly raises the minimum base rate for surcharges, increases the weighting for repeated violations, and reduces benefits for mitigation.

Fair Trade Commission. The Asia Business Daily DB.

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On March 9, the Fair Trade Commission announced that it will issue an administrative notice for the revised 'Detailed Standards for Imposing Surcharges.' The notice period will run from March 10 to March 30. After a period for public comment, the new standards are scheduled to take effect in April. This revision is a response to criticism that the current surcharge system is not effective enough as a deterrent, resulting in companies repeatedly and customarily violating the law.

The core of the revision is a substantial increase in the minimum base rate used to calculate surcharges. This move addresses criticism that the previously low minimums specified in the guideline meant the actual applied rates fell far below the legal maximum.

For unfair concerted actions (collusion), the minimum rate for less severe violations will be raised from the current 0.5% to 10.0%. For extremely serious collusion, the minimum is set at 18.0%, making it nearly impossible to avoid a surcharge close to the legal maximum of 20.0% if caught.

For unfair support and private interest appropriation, the minimum base rate will be raised from 20% to 100% to ensure that the surcharge at least matches the amount of support provided. This reflects an intention to reclaim the full amount of support regardless of the severity. The maximum rate will also be raised from the current 160% to 300%, enabling punitive sanctions.

Kim Geunseong, hearing officer at the Fair Trade Commission, explained, "If 1 billion won is provided as unfair support, a surcharge of 300% (3 billion won) could be imposed," adding, "The system is designed so that the entire amount of support can be recovered as a surcharge."

Penalties for repeat offenders will become even more severe. The weighting system has been completely overhauled to ensure that breaking the law does not become a business strategy. If a company has violated the law even once in the past five years, the surcharge can be increased by up to 50%, compared to the previous 10%. In particular, for collusion, if a company has received a surcharge order even once in the past ten years, the rate can be increased by up to 100%.

On the other hand, the benefits for cooperation and mitigation will be significantly reduced. Companies must now cooperate throughout both the investigation and review stages to receive a total reduction of just 10%. Previously, a 10% reduction was possible at each stage, for a total of 20%. The provision allowing a reduction for minor negligence (10%) has also been eliminated.

Furthermore, if a company that received mitigation by cooperating during the Fair Trade Commission's investigation or review later changes its testimony in court, the Commission will now have the authority to revoke the mitigation granted in the original decision.

Kim added, "There have been cases where companies strategically changed their testimony in the hearing room to take advantage of the system, causing confusion in the application of the law," and emphasized, "This policy direction aims to strengthen the real deterrent effect against violating the law."

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