Recent Developments
in Korean Anti-Cartel Enforcement
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Adoption of punitive damages system for cartel violations |
On August 30, 2018, the National Assembly of Korea approved the Korea Fair Trade Commission (“KFTC”)’s proposed amendments to the Monopoly Regulation and Fair Trade Act (“MRFTA”), providing for punitive damages for cartel violations. The amendments will take effect within one year from their date of promulgation, which means the new punitive damages system will take effect from around September 2019.
The adoption of a punitive damages system allows the courts to make ‘treble’ damages awards in amounts up to three times the actual damage incurred by a plaintiff from cartel violations; currently, the maximum amount of compensation that a victim of a cartel violation can claim under the MRFTA is limited to the amount of its actual damages. This will continue to apply in cases where the cartelists have applied for leniency, but these leniency applicants will now be jointly and severally liable for the actual damages incurred from their cartel activities.
The primary objective of the amendments is to strengthen the deterrence effect of anti-cartel enforcement and provide more adequate relief for cartel victims.
It is anticipated that the new punitive damages system will spark continued discussion and debate on the implementation of more practical and cost-effective measures for providing relief to cartel victims (such as a class action system, for example).
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| Abolishment of the KFTC’s exclusive criminal referral right and Increase in administrative fines |
The KFTC is also working to implement two additional measures to strengthen anti-cartel enforcement as part of its full-scale reform plan for the MRFTA.
First, the KFTC has proposed to abolish its exclusive right of referral for criminal prosecution of “hard-core cartel” violations, such as price-fixing and bid-rigging. If the KFTC’s proposed amendments are approved by the National Assembly, the Public Prosecutors’ Office will be able to independently launch criminal investigations and indict cartelists on criminal charges; currently, this cannot be done without the KFTC’s referrals for criminal investigation and prosecution.
Second, the KFTC has proposed to increase the ceiling on administrative fines for cartel conduct. The maximum administrative fine imposable for each type of cartel conduct will be increased from 10% to 20% of the relevant turnover earned from the cartel activity. |
| Advice for multinationals doing business in Korea |
These recent developments in Korean anti-cartel enforcement clearly indicate the aligned resolution of both the KFTC and the current presidential administration to strengthen anti-cartel enforcement.
The role of economic analysis will thus become increasingly important in assessing appropriate punitive damages awards. As damages awards can now amount up to three times the actual damage incurred, the government and other public institutions can be expected to more actively pursue follow-on damages claims for bid-riggings in their public procurement tender processes. Accordingly, multinational companies doing business in Korea that participate in public bidding processes are advised to strengthen their internal compliance programs and thoroughly review their bidding procedures to enhance risk management, so as to prevent any involvement in cartel activities and be prepared to respond appropriately to a cartel investigation.
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