On August 30, 2018, Korea’s National Assembly passed an amendment to create a statutory basis in the Monopoly Regulation and Fair Trade Law (“FTL”) to allow punitive damages in civil lawsuits against cartels and retaliatory conduct.  

Generally:

The amendment also gives the Korea Fair Trade Commission (“KFTC”) an authority to request dispute mediation.  

The amended FTL, except for the punitive damage provision, will take effect on March 19, 2019.  The punitive damage provision of the amended FTL will take effect on September 19, 2019.

The amended FTL addresses the previous FTL’s lack of sufficient recovery scheme for damages suffered by the general public due to cartel and retaliatory conducts.  The previous FTL was criticized for its heavy focus on administrative sanctions that could be imposed by the KFTC while neglecting recovery of damages suffered by the public due to violations.  Substantial damage recovery was further limited under the previous FTL, because the KFTC was not able to apply for dispute mediation.  

Key Aspects of the Amendment / Significance:

1. Punitive damages against cartels and retaliatory conduct allowed

The amended FTL provides that enterprises can be liable for damages up to three times the actual damages to the plaintiffs who were harmed by: (i) cartels; and (ii) retaliatory conduct for filing a complaint against the enterprises with the KFTC.  

Punitive damages will not be imposed for leniency applicants.  Instead, leniency applicants will be jointly and severally liable with other cartel participants up to the actual damages suffered by the plaintiffs.

Additionally, the KFTC separately announced a proposed bill to completely overhaul the FTL amendment, in which the KFTC’s exclusive right to make criminal referrals will be abolished for hardcore cartels (such as price fixing or bid rigging cartels), allowing prosecutors to initiate criminal investigation and indictment against hardcore cartels without a prior KFTC referral.  The proposed bill was recently approved at the cabinet meeting.  

Significance: Given these developments, we expect the criminal and civil enforcement actions against cartels will become more frequent and will likely involve greater monetary exposure.  At the same time, the amendment reduces the liability for leniency applicants whose civil liability will be capped at the actual damages.  Therefore, companies who are considering leniency application should seek expert advice to minimize civil liability.

2. The KFTC official authority to request dispute mediation granted

The amended FTL creates a statutory basis for the KFTC’s authority to request the Korea Fair Trade Mediation Agency (“KOFAIR”) to mediate a dispute.  As such, the KFTC will be able to refer cases that do not warrant investigations to KOFAIR for mediation.

Significance: As the amendment will expand companies’ exposure against civil liability for damages, companies facing disputes should prepare appropriate response strategies to minimize the risks.