KFTC Announces Amendment to Administrative Fine Notification for Revised “Fair Trade Voluntary Compliance Program”

The Korea Fair Trade Commission (the “KFTC”) introduced a system to promote a culture of voluntary compliance with fair trade regulations known as the Fair Trade Voluntary Compliance Program (“CP”) in June of last year. This program provides various incentives such as the reduction of administrative fines to companies with outstanding compliance programs. The amendment to the Monopoly Regulation and Fair Trade Act (the “MRFTA”), which legislates this initiative, went into effect on June 21, 2024. The KFTC announced the proposed amendment to the Enforcement Decree of the MRFTA, which specifies the standards and procedures for implementing the CP system, in February 2024, and the Cabinet subsequently passed it on June 4. The proposed amendment became effective as of June 21, 2024.

As a follow-up to this amendment, the KFTC has established the “Regulation on the Operation and Evaluation of the Fair Trade Voluntary Compliance Program,” which contains details of the CP, such as the evaluation criteria and procedures (effective as of June 21, 2024). Additionally, the KFTC has amended the “Notification on Detailed Standards for Imposition of Administrative Fines (“Administrative Fine Notification”),” which includes the specific mitigating criteria and enhanced requirement for the fine reduction for cooperation with the KFTC’s investigation/review.

The amended Administrative Fine Notification took effect on August 28, 2024. The details are as follows:

Up to 20% Fine Reduction for Companies with Outstanding CPs

Businesses that receive high ratings in CP evaluations may be eligible for a fine reduction of up to 20%.
The reduction is up to 10% for AA ratings or 15% for AAA ratings.
An additional reduction of up to 5% can be granted if a company proves, before the KFTC commences an investigation, that it was able to detect and cease the violation through an effective operation of its CP.

This fine reduction is allowed only once during the validity period of a rating (i.e., two years). In addition, even if a company meets the ratings criteria, it is not eligible for the fine reduction where: (i) the violation occurred before adopting the CP, (ii) the violation includes certain types of hardcore cartels such as bid rigging, or (iii) senior executives of the company were directly involved in the violation.

Clarification of Grounds for Fine Reduction for Active Cooperation with KFTC Investigations

To enhance the effectiveness of the system of providing cooperation credit for businesses that actively cooperate with the KFTC’s review, the Administrative Fine Notification has been amended as follows:

Previous: A respondent who actively cooperates with the KFTC’s review/operation and acknowledges that it engaged in the alleged violation before the conclusion of the KFTC’s review would be eligible for a fine reduction of up to 10%.
Amendment: Under the enhanced requirement, a respondent must actively cooperate with the KFTC’s review, acknowledge that it engaged in the alleged violation, and also cease the violation (where the violation is ongoing) before the conclusion of the KFTC’s review to qualify for the reduction.

The KFTC has announced that it will proactively promote and institutionalize the CP system as a key initiative for 2024. Accordingly, efforts to spread and facilitate the CP system are expected to continue. Given that various incentives, including reduction in fine and exemption from official investigations, are provided based on the results of the CP evaluation, businesses that have not yet implemented a CP should weigh the pros and cons of doing so. Meanwhile, businesses already operating a CP system should ensure that the implementation and operation of the CP system align with the new requirements in the amended Administrative Fine Notification.

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