April 26, 2024

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[THE INVESTOR] South Korea’s antitrust watchdog is under mounting pressure to scrap its long-held exclusive right to charge businesses for fair trade violations, which opposition lawmakers say has been ineffective in monitoring chaebol’s unlawful practices against smaller firms.

The current law prevents prosecutors from indicting companies for competition law violations unless the Fair Trade Commission files an accusation. 

Rep. Choi Woon-yeol of the Democratic Party of Korea and Rep. Chae Yi-bae of the People’s Party have each proposed a bill to scrap the FTC’s exclusive right to charge businesses, claiming the FTC has been excessively lenient to big firms in evaluating their competition law violations.

“Maybe because of the conglomerates’ contribution to the local economy, the FTC has not been using its right to charge chaebol as much as it needed to,” Choi told The Korea Herald.

But he also admitted that with or without the role of the FTC, small and middle-sized enterprises’ heavy reliance on conglomerates fundamentally makes it hard for them to take any action in case of unfair practices.

“Small companies in partnership with conglomerates find it virtually impossible to press charges against conglomerates (with the FTC) because they fear conglomerates could end their contract,” Choi said.

The National Assembly’s National Policy Committee will hold a hearing on Monday next week where the ruling and opposition lawmakers and the FTC will reveal their respective stances on the issue. After revision bill evaluations, the committee will decide on the fate of the FTC’s right on Feb. 24.

Opposed to scrapping its right to charge, the FTC said in a report submitted to the Assembly on Feb. 15 that it could create greater damage to SMEs.

Proponents of the FTC’s exclusive right also claim that opposition lawmakers’ move is politically motivated to stress their agenda of chaebol reform without an in-depth evaluation or alternatives for the system.

“We take thousands of accusing reports from small and medium-sized companies per year. After evaluating with our own expertise, we file accusations with prosecutors only those considered ‘grave,’” an FTC official said on the condition of anonymity.

“Over 80 percent of accusations we receive come from conflicts between SMEs or between small vendors. If the FTC’s right is scrapped, those individuals might abuse suing SMEs, whose business activities will be in peril to deal with legal issues.”

The FTC, for its part, has contended it no longer holds the “exclusive right,” since June 2013, citing how a system was introduced then to allow other entities to demand the FTC take action in cases of unfair businesses. 

The Board of Audit and Inspection, Public Procurement Service and Small and Medium Business Administration can request the FTC file a case with the prosecution, and when such a request is filed, the FTC is obligated to follow through.

FTC officials contend that expanding the scope of this system would suffice.

Reports said the FTC is reviewing a proposal to also include the Korea Chamber of Commerce and Industry and Korea Federation of SMEs in the list as an alternative to having its exclusive right completely revoked.

The issue comes at a time when the watchdog is under investigation by the special counsel over whether it gave a favor to Samsung Group in 2015 when it had to weaken its shareholding chains in the wake of a merger between two of its affiliates, Samsung C&T and Cheil Industries, in July of that year.

In December 2015, the FTC ordered smartphone battery maker Samsung SDI to dispose of 5 million Samsung C&T shares, instead of its original ruling of 10 million shares. The FTC reducing the amount of shares could be interpreted as a favor to Samsung, news reports said.

FTC Chairman Jeong Jae-chan, as well as Vice Chairman Kim Hak-hyun, were called in by the special counsel on Feb. 10 and Feb. 8, respectively, for questioning over the FTC’s decision on Samsung C&T shares.

By Kim Yoon-mi/The Korea Herald (yoonmi@heraldcorp.com)