On June 21, 2024, the Korea Fair Trade Commission (“KFTC”) had introduced the fair trade voluntary compliance program (“CP”) whereby companies could voluntarily bring themselves into compliance with fair trade regulations in exchange for various incentives such as reduction of administrative fines. Since the initial launch of the program, the KFTC has been closely monitoring and analyzing the market reactions and has gathered feedback through various channels including town hall discussions with industry stakeholders to identify areas of possible improvements. On March 11, 2025, the KFTC announced its proposed amendment to the “Guidelines on the Operation and Evaluation of Fair Trade Voluntary Compliance Program (CP)” (enacted on June 17, 2024 and became effective on June 21, 2024; the “Guidelines”) that purports to introduce a number of important changes to ways CPs will be rated and evaluated by the KFTC (“Proposed Amendment”) based on the feedback it received since the program’s initial launch. The public commenting period for the Proposed Amendment continues until March 31, 2025.
The Proposed Amendment includes, among others, (i) raising the baseline for each CP rating, (ii) changes to how fair trade law violations affect companies’ CP ratings, and (iii) allowing the CP rating process to move forward (subject to possible downgrading) notwithstanding the pendency of formal inquiries against the relevant companies.
We summarize below the key details of the Proposed Amendment for your further reference.
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Fair Trade Law Violation to Result in Point Deductions Instead of Lower Ratings (Article 14)
Previously, if a company seeking CP evaluation received administrative fines or penalties for violating fair trade laws or obstructing the KFTC’s investigation, its rating would have been automatically downgraded by up to two ranks. Under the Proposed Amendment, the KFTC would deduct points (three evaluation points) instead of directly downgrading the rating in such circumstances (i.e., administrative fine; administrative penalty for refusal, obstruction, or evasion of the KFTC’s investigation; and criminal referral). Also companies seeking CP evaluation for the first time will be exempted from point deductions even if they have been found to have committed fair trade law violations.
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Increased Procedural Flexibility in Case of Fair Trade Law Violation by Companies Seeking CP Evaluation (Articles 9, 15, and 18)
Previously, the Guidelines gave the KFTC the option to withhold a CP rating or reject a CP rating in case the relevant company was subject to a formal investigation by the KFTC for a potential fair trade law violation that was deemed serious enough to undermine the integrity of the CP regime. The Proposed Amendment gives the KFTC the option to continue the CP evaluation process as well as the option to lower the CP rating in such circumstances, instead of withholding or rejecting the rating altogether.
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Higher Baseline for CP Rating (Article 13)
To improve the effective operation of the CP ratings evaluation, the Proposed Amendment purports to raise the baseline for the “excellent” ratings (A, AA) to 80 points for A (previously 70) and 85 points for AA (previously 80), with the point gap between the ratings narrowing from ten to five points. As a result, the baseline required to be eligible for CP incentives has increased from 70 to 80 points.
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New Evaluation Criteria and Procedures (Article 14)
To minimize the number of on-site evaluations which are burdensome to companies, the Proposed Amendment aims to introduce a three-step evaluation process as follows. After the first step (document review; includes the granting of extra points) and the second step (face-to-face evaluation), the KFTC will only proceed with the third step (on-site evaluation) if (i) the KFTC finds it necessary to conduct an on-site verification based on the first and seconds steps or (ii) the KFTC expects to reduce the amount of an administrative fine on the relevant company (rated AA or higher).
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Criteria for Granting Extra Points (Attached Table 2.5)
The Proposed Amendment introduces a maximum of 1.5 extra points for companies that received outstanding results from the KFTC’s evaluation of the performance of their obligations under subcontracting, distribution, agency, and franchise agreements. The Proposed Amendment also grants extra points for the operation of a self-regulated dispute mediation organization (specifically, the organization’s dispute intake process and its dispute settlement performance).
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Since its introduction in 2024, the CP has become an integral part of the KFTC’s key policy initiatives. Undoubtedly, voluntary compliance with fair trade regulations is increasingly an essential element of sustainable corporate growth, particularly given the growing social demands for corporate transparency and fairness. In this context, we encourage companies to take proactive steps to establish internal controls, reinforce efforts to comply with fair trade laws, and regularly review and monitor CP-related issues.
[Korean Version]
