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Newsletter | February 2014, Issue 1 |
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ANTITRUST & COMPETITION |
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KFTC’s First Application of the Consent Decree Process |
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On November 27, 2013, the Korea Fair Trade Commission (“KFTC”) agreed to apply for the first time the consent decree process in its investigation of Naver and Naver Business Platform (jointly, “Naver”) and Daum Communications (“Daum”) for their alleged violations of Korea’s Monopoly Regulation and Fair Trade Law (“FTL”).
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The consent decree process, adopted in November 2011, allows businesses subject to KFTC investigation to voluntarily propose corrective measures to restore the competitive order and remedy any potential consumer harm. After a public notice and comment period, the KFTC may approve the proposed measures and conclude the investigation without finding any liability. This process, which expedites the investigation process, has never been applied prior to this Naver and Daum case.
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Naver and Daum requested the KFTC to initiate the consent decree process for its investigation regarding: (i) display of Naver’s and Daum’s charged services along with search results; (ii) unclear distinction between sections for keyword advertisements and search results; (iii) restrictions on the ability of advertisers to change advertisement agencies; (iv) preferential negotiation rights granted to Naver for network search advertising (only applicable to Naver); and, (v) dispatch of Naver employees to its affiliated company (only applicable to Naver).
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The KFTC agreed to initiate the consent decree process in this case for the following reasons:
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Online search service market is a dynamic market, where technological innovation is an important factor that must be considered. |
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Online search services are closely related to the everyday life of Korean consumers, and therefore, a prompt restoration of competitive order is necessary. |
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Corrective measures voluntarily proposed by Naver and Daum would be more viable than those imposed by the KFTC and sufficiently effective in restoring the competitive order if proper measures are put in place. |
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Regulatory agencies in foreign countries have applied the consent decree process to similar cases. |
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After a 30-day negotiation with Naver and Daum, the KFTC agreed to a draft consent decree announced on December 31, 2013. This preliminary agreement included remedial measures worth KRW 100 billion for Naver and KRW 4 billion for Daum to restore the competitive order and improve consumer welfare.
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The 40-day public notice and comment period for the draft consent decree began on January 2, 2014. During this period, the KFTC has consulted with the Prosecutor-General in writing and notified other relevant administrative bodies (including the Ministry of Science, ICT and Future Planning and the Korea Communications Commission) of the draft decree. The final consent decree agreement will be finalized within 14 days after the end of the notice and comment period.
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