OECD kpcdb

1. Competition Law

 

The Monopoly Regulation and Fair Trade Act (the “MRFTA”) was enacted in December, 1980 and took effect in April, 1981.

 

The MRFTA regulates anti-competitive agreements, abuse of dominance, M&As that substantially lessen competition in Korea, and concentration of economic power. According to Article 1 the purpose of the MRFTA is to promote fair and free competition, to encourage creative enterprising activities, to protect consumers and to strive for balanced development of the national economy, by preventing any abuse of dominance by business entities and any excessive concentration of economic power, and by regulating undue collaborative acts and unfair trade practices.

 

In addition to major antitrust prohibitions, the MRFTA regulates unfair trade practices including “unjustly refusing to deal or treating a trading party in a discriminatory manner,” “unjustly excluding competitors,” “unjustly inducing or coercing customers of a competitor to deal with oneself.” 

 

General exclusion: There is no sector excluded or exempted from the application of the MRFTA. State-owned enterprises are not exempt from the application of the MRFTA when conducting commercial activities in competition with private firms.

 

Extra-territorial application: The MRFTA is also applicable to firms located outside Korea whose behaviour directly affects competition and consumers in domestic markets. The MRFTA’s merger control provisions are also applicable to foreign mergers.

 

2. Korea Fair Trade Commission

 

The Korea Fair Trade Commission (the “KFTC”) is an authority that enforces competition law and consumer law of Korea. The KFTC is a ministerial-level central administrative organisation under the authority of the Prime Minister and also functions as a quasi-judiciary body. 

 

The KFTC’s functions are to promote competition, strengthen consumers’ rights, secure competitive environment for small and medium-sized enterprises, and restrain concentration of economic power.

 

Organisational structure of KFTC: Located in Sejong City, the KFTC has 535 staff as of 31 December, 2016 with 5 bureaus and 5 regional offices in Busan, Gwangju, Daejeon, Daegu, and Seoul. The KFTC had an annual budget of $108 million in 2016.

 

As to its budget, the KFTC consults with the Ministry of Strategy and Finance and sets up a five-year financial management plan each year. Within the five-year plan, yearly plans are fixed at government level according to priorities. The National Assembly then confirms these plans for the following year.

 

The KFTC organises its resources in accordance with priorities that are annually determined in an annual plan that is made public. 

 

The KFTC is divided into the Commission and the Secretariat. The Commission is in charge of making KFTC decisions assisted by the legal advisors, while in the Secretariat, each division of bureaus under the Secretary General investigates a case and submits its examination reports to the Commission.

 

Article 37(1) of MRFTA specifies that the Commission shall be comprised of 9 Commissioners, including a chairman and a Vice-Chairman. Among them, 4 Commissioners shall be non-standing Members of the KFTC. 

 

The Chairman and Vice-Chairman shall be appointed by the President upon the recommendation of the Prime Minister. Commissioners are appointed by the President upon the recommendation of the Chairman. The term of office is 3 years for the commissioners and may be renewed only once. No Commissioner will be removed from office against his/her will except in the circumstances specified by Article 40 (e.g., where the Commissioner has been sentenced to imprisonment or becomes incapable of performing duties due to physical or mental weakness).

 

Other regulators with competition powers: There are no sector regulators that have competition powers. 

 

Competition advocacy: Article 63 of the MRFTA sets forth that the head of the relevant government agency shall seek prior consultation with the KFTC, where he or she plans to propose legislation having anti-competitive effects. In 2015, the KFTC put forth its opinions on 14 of the 1,444 requests made by relevant government agencies. Among them, 11 KFTC’s opinions were reflected out of 14. 

 

The KFTC prepared plans for competition assessment tailored to meet the Korean situation after the OECD released the Competition Assessment Toolkit in 2007. In late 2008, competition assessment was institutionalised and became an essential part of the legislative process in Korea with the revision of Guidelines on Regulatory Impact Assessment of the Prime Minister’s Office. 

 

The KFTC also undertakes market studies to reform existing anti-competitive regulations. Past areas of market study include: air transport, web portal, film, oil, pharmaceuticals, liquor, cosmetics, online education, digital music, multi-channel video service, advertisement, insurance, car rental industry, gas industry, and railway (non-freight). The Market Structure Policy Bureau was established with the KFTC in 2009 to take charge of such regulatory reforms. If an obstacle or a restriction to competition is identified in existing policies, the KFTC provides an opinion to the relevant government agencies to reduce or eliminate such an obstacle or restriction. The relevant government agencies, with discretion, determine whether they take measures according to the opinion. 

 

International co operation: The KFTC has signed international co operation agreements or MOUs with 15 competition authorities in total, including the EU, the US DOJ, the US FTC, Japan, China, Russia, Brazil, Australia, Latvia, CIS, Mexico, Turkey, Canada and Indonesia amongst others. Full texts of the MOUs or agreements are available at the KFTC’s website.

 

3. Investigation

 

Initiation of investigation: The investigation into an alleged violation of law can be initiated either by a report from any person who notices such conduct, or at the KFTC’s own initiative. If the investigator concludes that countermeasures are necessary, he/she prepares an examination report and presents it to the Commission. The investigated company can also review the examination report and submit objections or comments on the report.

 

Powers of investigation: Article 50 (1) of the MRFTA allows investigators to summon the relevant parties, interested parties or witnesses to a hearing; seek their opinions; issue an order to an business entity, or employee to report on business conditions and to submit other necessary materials; and retain submitted materials or items.

 

Article 50 (2) and (3) of the MRFTA also grants the KFTC the authority to have an investigator access the office or place of business of business entities in order to examine the business and management situation, account books, documents, electronic materials, and voice-recording materials.  Any investigator who conducts an examination at the investigated company’s place of business, may order business entities to submit materials necessary for examination, or retain the materials or things submitted.

 

Since the investigation carried out under Article 50 (2) is conducted after receiving the consent of the investigated firms, a warrant or court authorisation is not required for such investigations. However, in actuality, investigated firms are compelled to comply with investigation procedures, as non-compliance is punishable with a criminal sanction under Article 67 of the MRFTA.

 

Failure to comply with investigation: Article 69-2 of MRFTA stipulates that persons who fail to comply with summons issued under Article 50(1)1, without justifiable grounds, are subject to a fine not exceeding KRW  100 million. Persons who fail to file a report or present necessary materials as prescribed under Article 50(1)3 or (3), or persons who file a false report or present false materials, or persons who refuse, interfere with or evade an investigation under Article 50(2) are punished by imprisonment not exceeding 2 years or a criminal fine not exceeding KRW 150 million, in accordance with Article 67.

 

Procedural fairness: The MRFTA provides for procedural rules and the KFTC has published guidelines regarding its investigations, namely the Investigation Procedure Rules and Rules on the FTC’s Committee Operation and Case Handling Procedure. These guidelines set out overall investigative procedures of the KFTC. Article 52 (1) and (2) (opportunity to express opinion), and Article 52-2 (request for access to data) of the MRFTA specify the concerned parties’ rights to make a statement of opinion to the KFTC before a decision is taken.

 

Confidentiality: Article 29(12) of rules of KFTC's operation and case handling procedure defines trade secrets, privacy secrets, voluntary report related data, and other classified data specified by provisions of other laws as confidential data.

 

Article 62 of the MRFTA stipulates that the Commissioner, public officials, or staff of the KFTC shall not divulge or use any confidential information of an business entity or an business entity’s organisation, which they learned in the course of carrying out their duties under the MRFTA or while performing mediation of disputes.

 

Violation of Article 62 is punishable by imprisonment for no more than 2 years, or by a fine not exceeding KRW 2 million, in accordance with Article 69 (2).

 

4. Remedies and sanctions

 

The KFTC may impose corrective measures and/or surcharges (administrative measures in nature) on those who infringed the MRFTA, and refers serious infringement cases to the Prosecutor’s Office requesting for a criminal fine or imprisonment. 

 

Details on the penal provisions can be found under each Section below.

 

Consent Decree: Under Article 51(2) to Article 51(4), business entities being investigated by the KFTC can apply for a consent decree, alongside remedies. Should the KFTC determine that the remedies are adequate, it may issue a consent decree. A consent decree does not involve business entities admitting that they are guilty of violating the law. A consent order is applied to the conduct that is allegedly in violation of the MRFTA. However, consent decrees are not available for cartels and obvious and serious degree of violation cases.

 

Once a consent order is decided it is considered an administrative measure of the KFTC, and accordingly, the business entity has an obligation to follow the consent order. In the case where the consent order is not executed without justifiable reasons, the consent order shall be cancelled or an enforcement fine that does not exceed KRW 2 million per day will be levied.

 

5. Appeal

 

In accordance with Article 53 and 54, any party dissatisfied with any measures taken by the KFTC usually chooses to: 1) request for a review to the KFTC; or 2) file a lawsuit. In practice, parties can choose both ways at the same time. Usually the decision from the KFTC’s review is delivered earlier than the Court’s decision. 

 

Moreover, after requesting for a review, any party dissatisfied with the decisions taken after KFTC’s review may further appeal to the Court. Such a request for review or lawsuit must be filed within 30 days from the receipt of a notification of the said measures. Article 55 sets out that the Seoul High Court has exclusive jurisdiction over any lawsuits for appeal cases filed pursuant to Article 54.

 

6. Private enforcement 

 

Damages caused by an antitrust infringement can be compensated under the MRFTA, by filing a lawsuit to a district court. Article 56 of the MRFTA prescribes that the infringer is not liable for compensation of damages if they are able to prove that the violation of the provisions occurred without any deliberation or any negligence. 

 

Even before the KFTC makes any decisions on an alleged violation of the MRFTA, any person harmed by the violation may seek damages under the MRFTA.

 

Article 57 of the MRFTA stipulates that in situations where it is extremely difficult to determine the amount of damages, the court may recognise reasonable amount of damages based on the intent of entire arguments and the results of the investigation.