April 25, 2024

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[THE INVESTOR] A day after Kim Sang-jo, chief of the Fair Trade Commission, apologized for a corruption scandal involving former officials getting hired at companies previously under the watchdog’s watch and promised an overhaul, the government is moving to bring about major changes in a joint effort with the ruling party.
On Aug. 21, they agreed to revise the Fair Trade Act, which had given FTC exclusive power to bring antitrust trade cases to court through the state prosecutors’ office. Below are some questions you may have about the proposed changes. 

Fair Trade Commission Chairman Kim Sang-jo (left) and Justice Minister Park Sang-ki FTC

Q: What kinds of power does FTC hold under the current Fair Trade Act?
A: Under the current Fair Trade Act enacted in 1980, FTC is the only entity that can bring an antitrust trade case to court through the prosecutors’ office. The law is aimed at preventing a flood of lawsuits being filed against firms by individuals and civic groups, which the business community claims could hurt their normal operations.

Q: What were the drawbacks?
A: The current law gives too much power to FTC, and at the same time there has been persistent criticism that it has been too reluctant to exercise its exclusive rights to deal with antitrust activities.
Some also pointed out that the 38-year-old law fails to reflect the latest industry trends and better protect the rights of consumers.

Q: What exactly is FTC giving up?
A: The agency said that it has decided to give up its rights to file complaints about major cases, such as hardcore cartels, to support law enforcement and better protect consumer rights. The corporate watchdog will continue to handle general antitrust cases, while the Justice Ministry will investigate major cases that have a far-reaching impact on the economy and society as a whole.
“The two most problematic issues in Korea are price rigging and abuse of power,” said Lee Hwang, an economic law professor at Korea University. “Now that prosecutors have the rights to investigate these kinds of cases, the power will be shifted to them from FTC.”

Q: Should companies be concerned or relieved?
A: When prosecutors are given the power to initiate an investigation on major cases, businesses will have to deal with both FTC and prosecutors. The biggest concern for them is if the leniency program would work effectively.
The leniency program is a tactic adopted by the FTC to encourage companies to turn themselves in. Companies are then exempted from punishment. This used to be a critical tool for uncovering cartels. In 2017, 41 out of 51 price-rigging cases brought by FTC were through the leniency program.
FTC will now share the leniency list with prosecutors, meaning the companies can be charged even if they turn themselves in. This could discourage firms from coming clean. So to help offset such side effects, the two organizations plan to expand the mercy program to individuals, who currently are not subject to the leniency program.

Q: Are there any other expected changes?
A: FTC said earlier it would seek to revise the law forbidding inter-affiliate trading within a business group whose owner and family holds 30 percent or more of listed affiliates by lowering the threshold to 20 percent. For unlisted subsidiaries, the limit is 20 percent. The change will increase the number of affiliates governed by this rule from 203 to 440 units.

Q: What is behind all these changes?
A: It was President Moon Jae-in’s election pledge to abolish FTC’s exclusive rights and distribute them to the prosecution. This was because the watchdog faced complaints that it has become too lenient. After the prosecution indicted a dozen former and incumbent FTC officials for the corruption scandal, the need for change became even more pressing.

By Park Ga-young (gypark@heraldcorp.com)