On March 6, 2020, the Korea Fair Trade Commission (the “KFTC”) announced its enforcement plan for 2020, setting a goal to establish “a fair and active market perceptible in people’s daily lives.”

Through implementation of the enforcement plan for 2020, the KFTC aims to establish a foundation for a fair economy in order to achieve sustainable growth of the national economy, a business ecosystem in which innovation-led competition is promoted, thereby bringing in a new growth power, and changes in business practices and corporate culture. 

In accordance with the enforcement plan, the KFTC announced six key tasks: (i) protecting small and medium-sized businesses and sole proprietors, (ii) eliminating abuse of market power by conglomerates, (iii) fostering an innovative ecosystem of new and fast-growing industries, (iv) promoting fair competition in businesses related to people’s daily livelihood and revitalizing the market, (v) establishing consumer policies tailored for the digital economy and (vi) establishing fair and cooperative business practices.

We summarize below major details of the 2020 enforcement plan’s key tasks: 

• Protect Small and Medium-Sized Businesses and Sole Proprietors: The KFTC will enhance its monitoring efforts in business areas prone to repeat violations resulting in damages from unfair business practices.  These business areas include mid-sized shipbuilding and construction companies and businesses involved in subcontracting or exclusive transactions for private-brand products.  Further, the KFTC will monitor conducts pressuring economically weaker counterparties that have previously not been examined by the KFTC.  For instance, the KFTC will monitor the act of large distributors implicitly passing on promotional expenses to suppliers as well as fee arrangements of outlets or large-sized shopping malls.  In addition, the KFTC will prepare measures to prevent unfair business practices in the online market industry.

• Eliminate Abuse of Market Power by Conglomerates: The KFTC will call for correction of conglomerates’ practice of collecting “traffic tax” and monitor unfair business practices by medium-sized companies in the food, housing and clothing industries as well as the raw materials industry.  In addition, the KFTC plans to improve the three disclosure requirements (i.e., disclosure of large-sized intercompany transactions, disclosure of material events by privately-held companies and disclosure by regulated business groups) and establish “self-compliance standards for the practice of intragroup trading among conglomerate-based affiliates” in business sectors involved in a number of intercompany transactions such as the logistics and SI (system integration) sectors. 

• Foster Innovative Ecosystem for New Industries and Industries with High Growth Potentials: In 2019, the KFTC showed a particular interest in monitoring and regulating monopolies in new industries and industries with high growth potentials.  In 2020, the KFTC will continue to monitor and regulate anti-competitive abuses by dominant market players in the ICT and semiconductor industries, balancing dynamic efficiencies for merger transactions in newly emerging industries such as delivery platforms.  Further, in order to promote large companies’ investment in small-to-medium sized ventures or start-up companies, the KFTC plans to ease regulations such as the equity ratio requirement of venture holding companies and restriction on stock acquisition by non-affiliates. 

In addition, the KFTC will focus on monitoring cartel cases in industry sectors closely related to public welfare as well as monopolies in certain markets, such as the health functional food market, which has not received much attention before, in order to promote fair competition and vitality in the market.  Further, by protecting consumers in digital transactions and expanding the introduction of standard contracts for various business types, the KFTC will try to facilitate voluntary cooperation for fair business practices. 

Implications

The KFTC is currently preparing measures to follow up with the proposed amendment to the FTL, which enhances the protection of respondents’ right to defense.  However, pursuant to its enforcement plan for 2020, it appears that the KFTC will also strengthen its capabilities for on-site investigations.  In particular, the KFTC plans to deploy digital forensic methods to all cases requiring collection and analysis of digital evidence.  As such, the KFTC will likely have more forensic experts involved in its on-site investigations.  Therefore, it is important to understand the respondents’ legal rights in connection with digital evidence in order to properly exercise the right to defense.  In addition, the KFTC plans to conduct an in-depth economic analysis in cases involving unfair support, which require economic analysis, and all merger cases triggering the statutory presumption of anti-competitiveness.  Therefore, it will be necessary to consider the need for advocacy based on a strong economic analysis as an effective defense strategy.