The amended Criminal Referral Guidelines (“Amended Guideline”) prepared by the Korea Fair Trade Commission (“KFTC”) became effective on April 9, 2018. The Amended Guideline is designed to reinvigorate the KFTC’s objective to curtail violations of the Monopoly Regulation and Fair Trade Law (“FTL”) by actively pursuing criminal referrals of individuals and corporations in future KFTC investigations.
Details:
The Amended Guideline (i) provides detailed and clearer criteria for criminal referrals; and (ii) sets out a low bar for criminal referrals against both individual employees and companies.
More specifically, in contrast to KFTC’s past practice of making criminal referrals against company representatives or key management members, the KFTC makes its intent clear to aggressively pursue criminal referrals against individual employees, regardless of their position. As for companies, the Amended Guideline reduces penalty points needed for mandatory criminal referrals so that a violation may be mandatorily referred to the prosecutors’ office even though it is not deemed “highly significant” based on the Guidelines on Administrative Fines.
1. New criteria for criminal referrals of individuals
The Amended Guideline newly introduces a separate set of detailed severity determination criteria for pursuing criminal referrals against individual employees. Such criteria include: (i) whether the individual took a leading role in the decision-making process; (ii) the degree of the individual’s awareness of illegality; (iii) the extent of the individual’s involvement in the conduct that is in violation of the FTL; and (iv) the duration of such involvement.
Also, the Amended Guideline sets a relatively low bar for criminal referrals, since being deemed a “high level” violation for at least one of the first three criteria would significantly increase the chance of the individual in question to become subject to a mandatory criminal referral under the Amended Guideline.
Further, the new criteria do not take into account the individual’s position. For example, a non-management, working-level employee may be subject to criminal referral due to the increased likelihood that the overall penalty points would exceed 2.2, which is the threshold for a mandatory criminal referral in case he/she “assists in the decision-making process by delivering directions from the upper-level personnel, participating in the mid-level decision-making, coordinating for problem solving, or developing opinions for the decision-making” (2 penalty points).
2. Unified and stricter criteria for determining severity of violation as grounds for criminal referrals
Prior to the amendment of the Criminal Referral Guideline (“Guideline”), the KFTC provided separate sets of criteria under different guidelines for determining the severity of violations for companies – one for the previous Guideline and another for administrative fine calculation. Recognizing that the existing bifurcated structure has been a source of confusion in practice, the KFTC decided to remove the criteria in the previous Guideline and instead refer to the criteria for determining the severity of violations for the administrative fine calculation under the Guidelines on Administrative Fines.
This change may have significant implications, since it lowers the bar for mandatory criminal referrals for companies from 2.5-2.7 penalty points to 1.8 penalty points.
3. Streamlined and clearer criteria for exemption from criminal referrals
The existing Guideline provides that the KFTC may reconsider its decisions to make criminal referrals considering factors that, in practice: (i) may not always provide clear guidance; or (ii) be redundant or not aligned with the overall structure of the Guideline.
Under the Amended Guideline, the KFTC decided to remove such vague elements and provide for clearer and more limited grounds for reconsideration, such as “voluntary correction of violation,” “past history of violation,” “potential impact on the safety/health of the general public,” and the “level of cooperation with the KFTC investigation” that would impact the severity of the violation.
Significance:
Given the increased risk of criminal referrals for individual employees, whether management level or not, it will be important for companies to educate each employee accordingly, enhance their awareness of compliance requirements, and in doing so, help them refrain from any conduct in violation of the FTL.
