On December 5, 2024, the Korea Fair Trade Commission (“KFTC”) has announced the “Guidelines for Self-Compliance with the Fair Trade Law regarding Environmental Sustainability” (“Guidelines”).
Amidst active efforts by domestic and overseas companies to seize the climate tech market,[1] such as engaging in joint research and development or joint production, concerns have been raised that such efforts by companies for environmental sustainability may be in conflict with the competition law.
In line with the ongoing global discussions on competition law and policy over the issue of environmental sustainability in recent years, the KFTC has prepared the Guidelines to alleviate any legal uncertainties regarding competition law violations related to eco-friendly business activities and to enable companies to actively engage in such activities without the risk of violation.
The Guidelines describe the various types of collaborative conducts and unfair trading practices relating to activities for environmental sustainability, providing detailed explanations and relevant examples of the factors that can be considered when assessing the unreasonableness of each conduct type. We set out below key information regarding the purpose, scope, basic principles, and relevant considerations regarding the Guidelines.
|
1.
|
Scope of Application
The Guidelines apply specifically to acts that primarily aim to enhance environmental sustainability, such as reduction of carbon or greenhouse gas emissions, waste minimization, mitigation of environmental pollution, and recycling promotion, among conducts that may be subject to unfair collusive conducts (including prohibited acts by business organizations) and unfair trade practices under the Fair Trade Law (“FTL”).
|
|
2.
|
Basic Principles
The assessment criteria for illegality is identical to the current criteria under the existing guidelines, such as the “Review Standards for Collaborative Conducts” and “Unfair Trade Practice Review Guidelines.” Based on such existing framework, the Guidelines present case examples concerning matters that should be considered under the FTL when engaging in business activities aimed at enhancing environmental sustainability.
|
|
3.
|
Assessment Criteria by Type
|
-
Collaborative Conducts
Agreements aimed at enhancing environmental sustainability may create both anti-competitive effects and efficiency enhancing effects. If the efficiency enhancing effects outweigh the anti-competitive effects, such collaborative conduct may not be considered unfair.
The factors to consider when determining cases of low unfairness for each category of collaborative conduct under the Guidelines are as follows.
|
Category
|
Case of Low Unfairness
|
|
Common Criteria
|
Individual Criteria
|
|
Joint Research and Development, Technological Alliances
|
-
When the total market share of the participating companies is not high
-
When research and development is being conducted in the field of fundamental research
-
When the subject or duration of the research and development is limited to the necessary scope
-
When measures are in place to block exchange of information relating to important competitive factors, such as price, which fall outside the necessary scope
-
When there are no restrictions on independent research and development or restrictions on manufacturing and sales activities after the completion of the joint research and development
-
When mutual licensing or patent pooling is carried out under fair, reasonable, and non-discriminatory conditions
|
|
Voluntary Standard
|
-
Agreements or information exchanges regarding important competitive factors, such as price, are not included
-
The process of standard development and adoption is transparent and allows all businesses to participate
-
Businesses that do not participate in the standard development and standard-setting process can access the adoption or certification of the standard without discrimination
-
Businesses can choose whether to comply with the standard at their discretion, and there are no adverse actions against non-compliant businesses
-
The standard is applied uniformly to all members of a business association without discrimination
-
The use of specifications or standards that compete with the relevant standard is not excluded
-
The increase in costs resulting from following the standard does not constitute a significant proportion of the total cost of the product or service
|
|
Joint Production
|
-
When the cumulative market share of the participating companies is not high, and significant competitors exist
-
When measures are in place to block exchange of information relating to important competitive factors, such as price, which fall outside the necessary scope
-
When other companies can freely participate without restriction
|
|
|
Joint Purchasing
|
|
|
Joint Logistics, Sales Alliance
|
-
When the proportion of joint logistics and sales costs relative to the overall supply cost of the product is low
-
When there are no other restrictions on business activities other than logistics and sales
|
|
Information Exchange
|
-
When the number of participating companies and their cumulative market shares are low
-
When there is low relevance to key competitive factors
-
When there is a high necessity for the collection and sharing of the information
-
When the scope of information sharing is limited and the duration of sharing is short
-
When the participating companies are able to operate independently
|
|
Category
|
Case of Low Unfairness
|
|
Common Criteria
|
Individual Criteria
|
|
Refusal to Deal
|
Refusal to Deal Joint Trade
|
-
When voluntary consent is obtained through substantial negotiations with the counterparty after presenting the terms of the transaction
-
When the efficiency enhancing effect significantly outweighs the effect of impeding fair trade caused by the unreasonableness of the transaction terms
|
|
|
Other Refusal to Deal
|
|
Abuse of Superior Bargaining Position
|
Forced Purchase
|
-
When the costs arising from the counterparty’s acceptance of demands for pro-environmental improvements are reasonably reflected in the transaction price
-
In cases of business interference, when it is necessary for compliance with legal obligations
|
|
Forced Benefit Provision
|
|
Imposition of Disadvantages
|
|
Interference in Management
|
|
Restrictive Dealings
|
Exclusive Dealings
|
-
When substantial foreclosure effects do not occur in light of the market shares, etc.
-
When the counterparty is imposed a purchasing obligation for a certain period in order to induce investment for development of eco-friendly technologies or to secure demands for continuous investment
-
When specialized maintenance services from a specific trading partner are needed due to proprietary technologies introduced for environmental improvements
-
When the effect of increased efficiency significantly outweighs the anti-competitive effects
|
|
Restrictions on Trading Territories or Counterparties
|
-
Allocating specific sales territories to distributors to induce investment for the active distribution and promotion of eco-friendly products
-
Selective distribution dealing only with distributors that meet certain criteria
-
When the effect of increased efficiency significantly outweighs the anti-competitive effects
|
[1] Refers to innovative technologies that contribute to reducing greenhouse gas emissions and overcoming the climate crisis.
[Korean Version]
