KFTC Raises Minimum Surcharge Up to 20 Times... 100% Additional Penalty for Repeat Collusion

The Korea Fair Trade Commission (KFTC) announced on April 28 that it will implement a revised version of the “Detailed Standards for Imposing Surcharges” starting from April 30, significantly strengthening the criteria for imposing monetary penalties to enhance the effectiveness of economic sanctions. With this revision, the longstanding corporate practice of treating legal violations as part of business costs is expected to improve substantially.

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The core of the revision is to raise the minimum surcharge rate for all types of violations, thereby establishing a basis for punitive sanctions. The area most significantly reinforced is unfair support and private interest transactions. Previously, violations deemed less serious were subject to a surcharge of 20% of the support amount, but this has now been raised to 100%, so at least the entire amount of support will be fully recovered as a surcharge. The upper limit for surcharges has also been dramatically increased from the previous 160% to 300%, strengthening sanctions against particularly malicious violations.

The minimum surcharge rate for unfair concerted actions (collusion) has also been significantly increased. For very serious violations, the minimum rate has been raised from 10.5% to 18.0%; for serious violations, from 3.0% to 15.0%; and for less serious violations, from 0.5% to 10.0%.

Economic sanctions for repeat offenders will also be strengthened. Currently, if a business has a single violation within the past five years, the surcharge is increased by 10%; going forward, even one prior offense can result in an increase of up to 50%. The maximum increase rate based on the number of violations will be expanded from the current 80% to 100%. In particular, for collusion, if there is any history of a surcharge payment order within the past 10 years, the regulations have been amended to allow up to a 100% increase if collusion is detected again.

The requirements for the reduction system, which companies have used to lower surcharges, have been significantly tightened. Previously, a 10% reduction was possible at each stage of investigation and deliberation (for a total of 20%), but now, a maximum reduction of 10% will be granted only if the company consistently cooperates and acknowledges the facts of the violation from the investigation through to the conclusion of deliberation.

The maximum reduction rate for voluntary corrective action has been decreased from 30% to 10%, and the 10% reduction previously applied to violations due to ‘minor negligence’ has been eliminated entirely to strengthen accountability.

Additionally, the KFTC has rationally overhauled the detailed evaluation criteria, such as establishing new standards for cases where the ordering party in bid-rigging cases is a local education office or individual schools.

The KFTC stated, “We expect that this revision will lead to a breakthrough in eradicating collusion and unfair support practices, both of which inflict serious harm on the livelihoods of ordinary people.”

Meanwhile, the revised standards will not apply to violations that were completed before the effective date (April 30); previous regulations will continue to apply to such cases.

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