On March 5, 2020, Chairwoman Sung-Wook Joh of the Korea Fair Trade Commission ("KFTC") reported the KFTC's 2020 Enforcement Plan ("2020 Plan") to President Moon.  As a roadmap for the KFTC's enforcement activities for the coming year, we should assume that the 2020 Plan reflects a coordinated view with other government agencies, including the Blue House.  As such, it should be viewed as the most concrete guidance on the KFTC's enforcement priorities.

The 2020 Plan shows that the KFTC's overall policy direction will not considerably deviate from previous years since President Moon took office in 2017.  In 2020, the KFTC will continue to focus on (i) promoting and protecting fair economy, (ii) protecting consumers, and (iii) promoting innovation-led economy, in line with the overall socio-economic policies of the Moon Administration.  In our view, each of the following keywords stand out from each of the above policy agenda items, respectively: (i) SMBs (small and medium-sized businesses), (ii) consumers, and (iii) ICT (information and communications technology).

SMBs

In 2020, the KFTC will continue to enforce the law to protect the economically weaker small businesses from the abusive practices of larger companies, both domestic and foreign.  For that purpose, the KFTC plans to focus its enforcement activities in subcontracting, franchising, and supplier-distributor relationship to protect subcontractors, franchisees and small distributors from unfair trade practices by their larger counterparties, such as unfair shifting of costs, conferring disadvantages, and interference with management.  In the 2020 Plan, the KFTC has already identified furniture, home electronics, publishing, boilers, petroleum distribution, and pharmaceutical industries as target industries for its sector inquiry with a particular focus on distributor relationship.

Also notable is that the KFTC specifically said in the 2020 Plan that the KFTC will closely monitor unfair financial audits, contract termination, management interference, and other types of imposition of disadvantages by the foreign head office against Korean wholesalers and distributors.  Interestingly, the KFTC calls this area a "blind spot" of its prior law enforcement, indicating that the KFTC should more closely scrutinize the overall supplier-distributor relationship and related disputes/complaints, especially involving multinational corporations.

ICT

The 2020 Plan continues to develop the KFTC's on-going interest in digital platforms and technology industry, which started last year with the formation of the ICT Task Force within the KFTC.  The 2020 Plan is notable in that it specifically names several target businesses for monitoring and enforcement, showing that the KFTC had been studying the industries and potential issues thoroughly.  In particular, the KFTC identifies the following subjects as areas of keen interest for its enforcement activities:

• online platforms: discriminatory treatment and exclusive dealing;
• online travel agencies: most favored nation/price parity clauses;
• mobile OS developers/app market operators: exclusive dealing;
• patent holders: unfair patent royalty calculation and package licensing; and
• chip/semi-conductor makers: market foreclosure in 5G market/technologies

The KFTC also announced that it has set up a second ICT team, focusing on developing competition law policies for the ICT industry.  This ICT policy team will prepare a unilateral conduct guideline for the platform industry by 2021, clearly showing the KFTC's readiness and commitment to ramp up its enforcement activities in the platform industry.  We see these announcements as the KFTC's declaration that "fair competition" must be the foundation for innovation-led growth, one of the pillars of the Moon Administration's economic policy.  The KFTC noted that throughout the year, the KFTC will hold various forums, symposia and roundtables with the private sector and academia to study and develop competition policies relating to platform industry, search algorithm, and SEPs (standard essential patents).

Consumers

The KFTC's plan for stronger consumer protection has a particular emphasis on consumers’ relationship with ICT companies.  The 2020 Plan announced that the KFTC will monitor the subscription and sharing economy, online platforms, OTT, e-books, micromobility, online used product marketplaces, social networks, and multichannel networks, to protect consumers in their dealings with respective companies.  Some issues that the KFTC is known to be interested in include partial refund policies, limitation of liability, penalties, and contract termination/removal of content.

Other Takeaways

Although the 2020 Plan generally takes the same course as previous years, we also see some unique emphases that distinguish Chairwoman Joh Sung-wook's leadership from that of her predecessor, Chairman Kim Sang-Jo.  Among others, we would like to draw your attention to the following two initiatives on which the 2020 Plan places a greater emphasis: (i) soft enforcement and self-compliance and (ii) economic analysis.  The 2020 Plan introduces several key ideas on soft-enforcement and self-compliance to encourage a strong compliance culture and self-correction by companies, such as lowering the fine amounts for companies adopting compliance program, proactively utilizing consent decrees, especially for resolving cases involving the ICT sector, and expanding the statutory mediation process for various types of unfair trade practices.

A flip side of the encouragement of compliance culture is the KFTC's implied intent to focus its enforcement resources on those cases that have a greater impact on the market. In particular, the 2020 Plan states that the KFTC will deploy digital forensic methods, utilizing the latest forensic tools, to all cases requiring digital evidence analysis.  It also states that the KFTC plans to increase the level of international cooperation and information sharing with other competition agencies.

As regards the economic analysis, as would be expected from a former professor of economics, Chairwoman Joh's 2020 Plan places a significant weight on the role of economic analysis in antitrust and competition law cases. In the past, in general, the KFTC had taken a rather passive approach in that it tended to conduct its own economic analysis only in response to the companies' offering up their economic analyses as part of their defense.  However, the 2020 Plan states that the KFTC will more actively utilize economic analysis as an investigation and analytic tool.  For example, the KFTC's plan is to conduct economic analysis in all merger cases that raise the presumption of anti-competitiveness.  While the trend to utilize economic analysis has been growing over the past decade, it has become even more important in light of the weight given under Chairwoman Joh’s 2020 Plan.

Other items discussed in the 2020 Plan include the liability of the customer who encourages or otherwise gets involved in bid-rigging, introducing the size-of-transaction test to merger review thresholds, and more robust regulations against large conglomerates.  We refer you to the attached summary for more details in all subjects mentioned above.