On August 31, 2022, the Korea Fair Trade Commission (“KFTC”) decided to accept Broadcom Incorporated and its affiliates’ (“Broadcom”) application for initiation of a consent decree process in its investigation regarding allegations of abuse of superior bargaining position against Samsung Electronics.  The allegations against Broadcom were that Broadcom had used unfair means, such as threatening to discontinue approval of purchase orders, shipments, or technical assistance, to force Samsung Electronics to sign a long-term supply contract regarding certain smart-device components (e.g., RFFE chips).  Broadcom’s application, which was submitted on July 13, proposes a preliminary list of voluntary remedies for the conduct alleged as problematic by the KFTC Examiner.

According to the press release announcing its decision, the KFTC held two full-committee hearings to review the application, and decided to initiate the consent decree process in order to (i) swiftly conclude the case considering the speed of technology development and dynamic competition in the smart-device components industry, and (ii) effectively improve trade practices between the two leading companies in their respective markets.  The press release also notes that the KFTC expects the consent decree will encourage Broadcom to proactively implement more specific remedies to accelerate innovative competition in the smart-device components industry and provide substantive support for R&D and market entry by SMEs in the industry.

Although the decision only pertains to the initial steps of the KFTC’s complex consent decree process (summarized below), it may signal a positive shift in the KFTC’s approach to consent decrees in line with the overall market-friendly policy direction of the Yoon Administration.  In this context, the KFTC may be more open to considering consent decrees as a means to (i) more quickly conclude cases that would have taken a longer time to resolve had the KFTC chosen to pursue a finding of violation, (ii) provide consumers and SMEs with swift and substantive relief, and (iii) enable effective restoration of competitive order in the relevant market.  The last time the KFTC approved a consent decree was in February 2021.

Going forward, the KFTC will further discuss the proposed remedies with Broadcom to develop an interim consent decree proposal, and gather comments and feedback from interested parties on the interim proposal before preparing a final consent decree proposal.  If this final consent decree proposal is accepted during a full-committee hearing following the comment period, the KFTC and Broadcom will enter into a consent decree and the KFTC will close its investigation without a finding of liability.  The KFTC will also likely select a monitor who will regularly assess Broadcom’s implementation of the consent decree.

Overview of KFTC’s Consent Decree Process
 

• Step 1: The company under investigation (“Applicant”) engages in preliminary discussions with the KFTC to determine whether to file a formal consent decree application.

• Step 2: The Applicant files an application with the case handler (“Examiner”) to seek to resolve the investigation through a consent decree.

• Step 3: The KFTC determines whether to commence the consent decree process. The Commissioners sitting en banc (“Commission”) are required to decide whether to commence the process within 14 days of receiving a report from the Examiner regarding the consent decree application.  In order for the Commission to commence the process and ultimately approve a consent decree, (i) the remedial measures must be in balance with the corrective measures and other penalties that would have been imposed by the KFTC if the conduct in question had been determined to be in violation of the Monopoly Regulation and Fair Trade Law (“FTL”), and (ii) the remedial measures must be suitable for restoring a fair and free state of competition, or otherwise redress harm to consumers and other companies.

• Step 4: Within 30 days of the Commission’s commencement of the process (or as extended by the the Chairperson of the Commission), the Examiner issues an interim consent decree proposal to the Commission and serves a copy of the proposal to the applicant.

• Step 5: The Examiner will notify, within 5 days of the interim consent decree proposal, the complainant (if any), relevant government agencies and interested parties and provide a 30-60 day period for comment regarding the proposal.  The notification to interested parties can take place in the form of a public notice in the official gazette or the KFTC’s website.  The Examiner is also obligated to consult in writing with the Prosecutor’s Office concerning the consent decree proposal.

• Step 6: The final consent decree proposal is submitted by the Examiner to the Commission within 14 days of the close of the comment period.

• Step 7: The Commission renders a decision regarding whether to adopt the final consent decree proposal.  The Commission can amend the final consent decree proposal with the consent of the applicant.  The Commission will hold a hearing, which is attended by the Examiner and the applicant, to decide whether to adopt a consent decree. 

• Step 8: The written consent decree is issued within 30 days of the Commission’s decision to adopt the consent decree in Step 7.