The Korea Fair Trade Commission (the “KFTC”) has amended the Notification on the Standards for Imposing Administrative Fines for Violations of the Act on Fair Labeling and Advertising (the “Notification”). The amendments became effective on January 3, 2025, except for one part outlined below.
The key amendments to the Notification are as follows:
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Calculation of “Relevant Revenue”
Administrative fines are, in principle, calculated as a percentage of “relevant revenue,” which refers to the revenue generated from the relevant violation during the period in which the violation occurred. The KFTC has imposed a fixed fine where relevant revenue could not be obtained from the violator. The amended Notification allows for the calculation of relevant revenue using other objective criteria, including sales performance before and after the violation, total sales generated during the relevant period, the proportion of selling relevant products, and market conditions.
Under the amended Notification, imposing a fixed fine will be reserved for exceptional cases where relevant revenue cannot be obtained using other alternative methods. The Notification has also been updated to ensure that, if a fixed fine is imposed, it does not exceed the maximum amount allowable under the relevant revenue standard (i.e., relevant revenue multiplied by the highest applicable penalty percentage).
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Standards for Reduced Administrative Fines
Prior to the amendment, a violator could be eligible for a 20% reduction in an administrative fine provided that it acknowledges the violation, and submits statements or materials to assist in the adjudication process throughout the KFTC’s investigation and deliberation procedures.
The amended Notification separates the criteria for reducing administrative fines based on cooperation extended during the investigation and deliberation procedures: (i) a 10% reduction may be granted for active cooperation during the KFTC’s investigation stage, and (ii) an additional 10% reduction may be granted for active cooperation and acknowledgement of the violation during the deliberation stage. To be eligible for the reduction for cooperation during the deliberation stage, the violator must acknowledge the violation and cease the conduct at issue until the KFTC’s deliberation is complete.
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All amendments to the Notification took effect on January 3, 2025, except for determining whether an additional 10% reduction may be granted for cooperation during the KFTC’s deliberation stage, which will apply only to cases reviewed after January 3, 2025.
[Korean Version]
