KFTC Announces Draft Bill for Full Scale Reform
of Monopoly Regulation and Fair Trade Act

• Enhanced regulation of information exchange. Currently, information exchange is not illegal in Korea, unless accompanied by actual collusion between the exchanging parties. However, under the proposed draft bill, collusion can be presumed if there are parallel anti-competitive behaviors among companies (whether or not they agreed to act in parallel) and the companies participated in the information exchanges needed for such parallel conduct. The KFTC has also proposed to include any “exchange of information on price, production quantity or other information that can substantially limit competition” as a new category of prohibited conduct.

• New merger filing threshold. Currently, the Korean merger review process only considers the parties’ worldwide and domestic assets/turnover to determine whether a merger filing is necessary. However, this leaves a loophole for parties acquiring start-up companies with significant potential upside but insufficient assets/turnover to trigger a merger filing. For example, the 2014 Facebook-WhatsApp merger with approximately 24 trillion Korean Won in consideration was exempt from Korean merger filing requirements due to Whatsapp’s relatively low Korean turnover. To close such loophole, the KFTC proposes to amend the current merger control provisions to include a new ‘transaction value’ threshold, so that mergers which do not meet the current asset/turnover thresholds may still require notification if the consideration for the merger meets the ‘transaction value’ threshold.

• Abolishment of the KFTC's exclusive right of referral to prosecutors. The KFTC proposes to abolish its exclusive right of referral for criminal prosecution of “hard core cartel” cases (which accounts for 90% of cartel cases) such as price-fixing and bid-rigging. This would enable the Prosecutors’ Office to independently investigate and prosecute antitrust violators, which it currently cannot do without the KFTC’s separate referral. In addition, to reflect concerns about the effect on leniency applications and potential for overlapping investigations by the KFTC and the Prosecutors’ Office, the KFTC is working with the Prosecutor’s Office to amend the existing leniency application process. For example, while the existing leniency process would primarily remain in place and the KFTC would remain as the sole channel for leniency applications, the KFTC would immediately share any leniency-related information with the Prosecutors’ Office.

• Increase in administrative fines. To respond to criticisms that current administrative fines do not have a sufficient deterrence effect, the KFTC proposes to uniformly double the ceiling on administrative fines for all types of antitrust violations. For example, the administrative fines for cartels, abuse of dominance, and unfair trade practices will be increased from 10% to 20%, 3% to 6%, and 2% to 4%, of relevant turnover.

• Private injunctions. Currently, an individual cannot seek court injunctions against potential competition law violations. The proposed draft bill allows the right to seek private injunctive relief from the courts to stop an alleged violation, for unfair trade practices which may cause significant harm to an individual.

• Reduction of statutory limitation period. The statutory limitation period for KFTC investigations will be shortened from the current maximum of 12 years to a maximum of 7 years. However, for cartel cases, the current statutory limitation period (7 years from termination of cartel activities, and 5 years from commencement of KFTC investigation) will remain intact, given the longer period required for cartel investigations.

If all reform measures proposed in the KFTC’s draft bill are passed by the National Assembly as currently drafted, the substantial impact on the Korean economy and antitrust enforcement regime will require enhanced risk management and compliance measures for companies operating in Korea, as the scope and penalties of the Korean antitrust enforcement regime would be expanded.

In particular, the KFTC’s resolve to strengthen anti-cartel enforcement is clearly evident. The absence of attorney-client privilege in Korea already makes risk management difficult, even with implementation of effective compliance programs. Accordingly, the fact that under the KFTC’s proposal, mere information exchange could lead to criminal prosecution causes quite some controversy. Moreover, the proposal contemplates introduction of class actions for private enforcement, and punitive (up to treble) damages will take effect from September 2019. With all of these changes to the Korean anti-cartel enforcement landscape, no amount of emphasis on antitrust compliance can be seen as too great.

The final bill for amendment will be presented to the National Assembly within this final quarter of 2018 and may be further revised based on review and any follow-up discussions within the National Assembly; as such, Lee & Ko will follow the progress of the proposed amendments, and continue to update our clients on the legislative developments.