1.

Key Details of the Amendment
 

(1)

Elimination of Incentives (Rating Adjustment and Ex Officio Investigation Exemption) (Articles 13 and 20)

The Amendment simplifies the CP outstanding company rating system by reducing the current six-tier system to a three-tier* system (AAA, AA, A), without raising the baseline for each rating. The Amendment also removes the ex officio investigation exemption for companies with an “A” rating, which was previously available to those with AAA, AA, and A ratings. There will be a grace period for benefits associated with the “A” rating until 2026.

* The existing ratings (AAA, AA, A, B, C, D) will be restructured into three ratings: (AAA (Outstanding), AA (Excellent), A (Relatively Excellent)).
 

(2)

Fair Trade Law Violations to Result in Point Deductions instead of Lower Ratings (Article 14)
 
The Amendment changes the penalty structure for CP evaluation applicants who violate the Fair Trade Law and receive administrative fines or penalties. Instead of automatically downgrading a company’s rating by up to two tiers, the KFTC will now deduct points (five evaluation points) for such violations. Furthermore, companies applying for CP evaluation for the first time will not face point deductions, even if they have committed Fair Trade Law violations.
 

(3)

Removal of the Option to Withhold CP Rating or Reject CP Rating (Articles 9, 15, and 18)
 
Previously, the KFTC had the authority to withhold or reject CP ratings for companies under formal investigation. The Amendment now allows for CP evaluations to continue during formal inquiries, as long as no formal charges have been confirmed. However, the KFTC retains the ability to lower a company’s CP rating or deny its designation as an outstanding CP company, if a potential violation of the Fair Trade Law is deemed significantly harmful to the integrity of the CP system.
 

(4)

Updated Evaluation Criteria and Procedures (Article 14)
 
To reduce the burden of on-site evaluations for companies, the Amendment introduces a streamlined three-step evaluation process: First, there will be a document-based review (which includes the potential awarding of extra points), followed by a face-to-face evaluation. The KFTC will only proceed to the third step (on-site evaluation) for companies rated AA or higher, or if an on-site evaluation is deemed necessary.
 

(5)

Criteria for Awarding Extra Points (Attached Table 2.5)
 
The Amendment establishes provisions for awarding up to 1.5 extra points to companies rated “excellent” (AA) or higher based on their performance in fulfilling obligations related to subcontracting, distribution, agency, and franchise agreements. Extra points can also be awarded based on the company’s dispute intake process and its dispute settlement performance.
 

2.

Implications

The Amendment introduces significant changes to the CP evaluation framework by (i) limiting the KFTC’s authority to withhold or reject CP ratings, (ii) optimizing the evaluation process through a sequential approach to face-to-face and on-site evaluations, and (iii) replacing automatic rating downgrades with point reductions for Fair Trade Law violations. These adjustments, made in response to stakeholder feedback, aim to correct previous deficiencies in CP evaluations and reduce the burden on participating companies.

Notably, the KFTC has chosen to maintain the current baselines for AA and higher ratings while eliminating the B and lower rating categories and removing incentives that were previously associated with the A rating.

This strategic shift underscores the KFTC’s intent to reserve the designation of “outstanding CP company” solely for entities rated AAA, AA, and A, thereby enhancing the credibility and effectiveness of the CP system. This approach reflects the KFTC’s commitment to the robust activation and continuous improvement of the CP framework through comprehensive evaluations, promoting a culture of compliance with fair trade regulations. As a result, it will be important for companies carefully consider proactively strengthening their internal control mechanisms, reinforcing their commitment to compliance with fair trade laws, and maintaining vigilant oversight of CP-related issues.
 

[Korean Version]