Newsletter | August 2014, Issue 3
	ANTITRUST & COMPETITION
	KFTC’s Announcement of a Draft Bill to Korean Competition Law
	On June 19, 2014, the Korea Fair Trade Commission (“KFTC”) announced that it identified 15 regulations in the Monopoly Regulation and Fair Trade Law (“FTL”) that it plans to amend so that Korean competition law is more consistent with the current market situation and global trends.  On July 17, 2014, the KFTC announced a draft bill to implement 11 out of 15 identified regulations by amending the FTL and its subordinate regulations.  The KFTC's stated plan is to consider the opinions of interested parties submitted during the legislative announcement period from July 18 to August 27.
	We provide below a summary of the major proposed amendments.
	Summary of Amendments to FTL
	Respondent’s Rights and Investigation Procedure
	In order to strengthen the respondent's rights and to assure fairness and transparency of the KFTC investigation and enforcement procedure, the KFTC plans to amend the FTL to directly provide for the following respondent's rights and clarification of the KFTC's investigation procedure.
	Categories Change Note Respondent's Rights Respondent's right to submit opinions and right to testify during investigation New Notification to respondent of commencement of investigation New Provision to respondent of the KFTC examiner's report Move from KFTC notification to FTL Respondent's right to submit opinions, rights to testify and right to request photocopies of submitted materials Move from KFTC notification to FTL Interested parties' right to request photocopies of submitted materials after the KFTC's issuance of decision New Investigation Procedure Establishment of the legal basis for the KFTC to initiate an investigation upon filing of a complaint with the KFTC New Delegation to the Enforcement Decree of the FTL of the determination of the investigation commencement date (starting point for the statute of limitations) Move from KFTC notification to FTL Establishment of the KFTC examiners' legal status and obligations Move from KFTC notification to FTL Clarification of the Commissioners' authority to initiate the hearing process New Establishment of legal grounds for the hearing preparation procedure, evidence inspection, and default decisions Move from KFTC notification to FTL
	Exemptions from Merger Review
	The following mergers that are unlikely to raise anti-competitiveness concerns would be exempt from the merger filing obligation under the amendments to the FTL:
	‒ Interlocking directorship if the number of interlocking directors is less than 1/3 of the total number of directors on the board; ‒ Mergers and business transfers between affiliates of a small company (a company is a “small” company if the consolidated total asset or annual sales revenue is less than KRW 2 trillion); ‒ Share acquisitions, incorporation of a new company, or appointment of interlocking directors by a company whose only business is investment or investment in a specific industry; and ‒ For private equity funds, pre-acquisition establishment of entities.
	Minimum Resale Price Maintenance
	The current FTL’s language deems minimum resale price maintenance to be a per se violation of the FTL.  However, minimum resale price maintenance can also have efficiency-enhancing effects by promoting non-price competition, such as competition on services.  The Korean Supreme Court also held that the rule of reason test should apply to the minimum resale price maintenance by balancing the anti-competitive effects arising from the restraint on intra-brand competition with the pro-competitive effects arising from the promotion of inter-brand competition.  The amendments to the FTL clarify that the rule of reason test will apply in circumstances such as when the benefits to customer welfare are greater than the anticompetitive effect to allow the minimum resale price maintenance.
	Extraterritorial Jurisdiction
	Article 2-2 of the current FTL provides for the extraterritorial jurisdiction of the KFTC if an act taking place outside Korea has an effect on the Korean market.  However, due to the ambiguity of “an effect on the Korean market”, there are concerns that the extraterritorial jurisdiction would apply too widely.  The proposed amendment to the FTL clarifies this ambiguity by limiting the effect on the Korean market as “direct, significant and reasonably foreseeable”.
	Future Focus of the Amendments
	Price Abuse by a Market Dominant Company
	The current Enforcement Decree of the FTL prohibits a market dominant enterprise from engaging in price abuse.  Price abuse is defined as an act of determining, maintaining, or changing unreasonably the price/cost of goods or services relative to changes in the supply and demand or in supply cost.
	The KFTC plans to remove the “supply cost” element from the determination of price abuse since (i) it is practically impossible to determine how much of a price change is due to the business’s market dominance, and (ii) other countries generally do not find issues with high price alone.  This plan is expected to be included in a bill to amend the FTL Enforcement Decree in the first half of 2015.
	Joint R&D and Technological Cooperation
	Under the current FTL, the KFTC reserves the right to review joint R&D and technological cooperation arrangements between competitors as a form of soft-core cartel.  However, such review may stifle joint R&D and technological cooperation efforts that can lead to innovation in the market.  As such, the KFTC plans to create a safe harbor for joint R&D and technological cooperation involving parties that meet certain market shares.  This plan is expected to be included in an amendment to the guidelines for review of improper concerted acts in the second half of 2014.
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	Sung Eyup Park separk@kimchang.com Tae Hyuk Ko taehyuk.ko@kimchang.com
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