On October 1, 2021, the Korea Fair Trade Commission (the "KFTC") issued an advance notice on a set of proposed amendments to the (i) Review Guidelines for Abuse of Dominance ("Dominance Guidelines”), (ii) Review Guidelines for Unfair Trade Practices (“Unfair Trade Practices Guidelines”), (iii) Review Guidelines for Resale Price Maintenance (“RPM Guidelines”), and (iv) Guidelines on the Provision of Monetary Reward for Reporting Violation of the Monopoly Regulation and Fair Trade Law.  The 20-day administrative notice period ends on October 21, 2021.

The proposed amendments contain changes necessary to implement the comprehensive amendments to the Monopoly Regulation and Fair Trade Law (the "FTL") and its Enforcement Decree scheduled to take effect on December 30, 2021.  Key details of the proposed amendments, which will take effect at the same time as the amended FTL on December 30, are as follows.
 

Of the above amendments, we detail the background and implications of the proposed amendments to the review guidelines for abuse of dominance, unfair trade practices, and resale price maintenance below.
 

• Dominance Guidelines

Currently, the Dominance Guidelines regulates "the offering of unreasonable terms in light of normal trade practice, or unfair discrimination in pricing or transaction terms" by a market dominant player as one type of unfair business interference proscribed under the FTL (as defined pursuant to Article 5 (1) 3 of the FTL) [Article IV. 3. D. (2) of the Review Guidelines for Abuse of Dominance].

In the proposed amendment, "unfair discrimination in pricing or transaction terms" is now separately listed as a type of conduct of unfair business interference, which the guidelines further defines as "unfair discrimination in pricing or transaction terms vis-à-vis the dominant entity itself or another transacting party."  Through this amendment, the KFTC has made clear that the so-called practice of self-preferencing, which has recently emerged as a major issue, may constitute unfair business interference.

Further, the proposed amendment reflects a Supreme Court decision regarding the criteria for assessing the anti-competitive effects of price increases and output decreases.¹ In the decision, the Supreme Court held that for a vertically-integrated entity (i.e., one that is active in both upstream and downstream markets), even if prices had dropped due to the entity's actions, such actions may be deemed to be anti-competitive and thus in violation of the FTL if there is potential for a price increase as competitors become excluded from the market in the mid- to long-term.

However, as the above case has been remanded to the Seoul High Court, it will be necessary to wait for the Seoul High Court's decision for an actual precedent on how to balance the short-term consumer welfare gains against mid- to long-term anti-competitive effects, and how to sanction such conduct.

The proposed amendment also further specifies the criteria for assessing anti-competitive conduct regarding foreclosure effect, by adding examples that are in line with Supreme Court Ruling 2013Du14726, January 31, 2019.
 

• Unfair Trade Practices Guidelines

Under the FTL, unfair use of another business’s technical data is classified as a type of unfair business interference.  The current Unfair Trade Practices Guideline defines the scope of technical data protected against unfair use to mean "matters concerning production method, sales method or marketing that is protected under relevant legislation, such as the Patent Act, or that was kept confidential through significant effort."

The proposed amendment eliminates the "significant effort" requirement from the definition, thereby expanding the scope of protected technical data.  This would allow the technical data of smaller companies, which are relatively ill-equipped to manage the confidentiality of their data, to be eligible for protection against unfair use as long as they kept the data confidential, regardless of whether there had been a "significant effort."  This brings the guidelines in line with the Unfair Competition Prevention and Trade Secret Protection Act, Act on Support for Protection of Technologies of SMEs, and Fairness in Subcontracting Transactions Act.

This means that going forward, unlike the past where unfair use of another business’s technical data has mostly been limited to subcontracting transactions, it is expected to become a greater issue in all types of business transactions, requiring businesses to exercise greater caution in their business activities.
 

• RPM Guidelines

Currently, under Article 29 (1) of the FTL, RPM schemes are, in principle, prohibited unless an RPM scheme is a maximum RPM that is based on a justifiable reason.  Despite this statutory provision, the Supreme Court has previously ruled that maintenance of the minimum RPM schemes can also be permitted if there is a justifiable basis for the scheme.²

Now that the FTL has been amended to reflect this Supreme Court ruling eliminating the distinction between maximum and minimum RPM, the RPM Guidelines have been amended to remove this distinction and instead permit RPM schemes on an exceptional basis when there is a justifiable reason for doing so.

[Korean version]