The amendment bill (the “Amendment”) to comprehensively overhaul the Monopoly Regulation and Fair Trade Law (the “FTL”) proposed by the Korea Fair Trade Commission (the “KFTC”), which went through a public comment period from June 11 through July 21, 2020, was passed at the Cabinet Meeting on August 25, 2020 and subsequently submitted to the National Assembly on August 31, 2020. 

The KFTC’s Amendment is nearly identical with the amendment proposed in 2018, which reflected the current administration’s strong policy directive to push for an overhaul of the FTL but failed to overcome objections by various interested groups, including the business community, other government agencies and the opposition party.  Therefore, once the Amendment is passed at the National Assembly at this time, the impact on the market will be considerable.

A summary of the Amendment is as follows.  

1.   Information Exchange as a New Type of Illegal Collusive Conduct 

Under the FTL, information exchange is not currently included as a type of illegal collusive conduct, and the Korean Supreme Court has taken a position that mere information exchange in itself does not constitute illegal collusion; rather, it only serves as circumstantial evidence of the existence of an agreement among the businesses which shared such information.  Recognizing that information exchange is often used in recent forms of collusion and that some major jurisdictions have responded to such trend by regulating information exchange itself as a type of collusive conduct or as a concerted practice, the KFTC aims to provide a clearer statutory basis for regulation through the Amendment.
 

2.   Selective Abolishment of KFTC’s Exclusive Authority to Make Criminal Referrals

The Amendment would allow prosecutors to issue indictments in hardcore cartel cases that could be highly unlawful and cause serious harm to consumers, even without the KFTC’s criminal referral.  Further, as the Amendment would explicitly allow the KFTC and the prosecutors to share with each other the materials gathered during the course of their respective investigation, a proper and thorough review and discussion of the required scope of document production would be important.  While more details to address potential issues, including overlapping investigations, are expected to be further worked out, businesses should take into consideration the possibility of a separate criminal investigation by the prosecutors independently of, or in addition to, the KFTC investigation. 
 

3.   Resale Price Maintenance

The Amendment would allow minimum resale price maintenance (“RPM”) to be assessed based on the rule of reason standard, departing from the current per se illegal stance the FTL takes as to minimum RPM.  The Amendment reflects the position consistently taken by the Korean Supreme Court since 2010 of adopting the rule of reason standard in reviewing minimum RPM cases in recognition of economic benefits that minimum RPM could bring and the global enforcement trend on this issue.  In other words, the Amendment is an ex-post reflection of the already changed standard in the enforcement practice on minimum RPM.  This change would allow businesses to implement more flexible pricing policies by balancing between the anticompetitive effects and efficiency enhancing effects expected from such pricing.  At the same time, it would be necessary and important for businesses to conduct sufficient reviews of reasonable grounds for their price policy, such as efficiency enhancing effects as well as pro-competitive effects, and document such reviews and analyses.
 

4.   Merger Notification Threshold Based on Size of Transaction and Local Nexus

The Amendment would require a merger notification if, separate from the existing thresholds based on the size and Korean revenues of the parties, the transaction size of acquisitions and the target’s activities in Korea meet certain thresholds.  More details on the transaction amount and the required level of Korean activities are yet to be provided in the Presidential Decree of the FTL, but the KFTC is expected to continue its close attention to such acquisitions involving innovative targets or data assets.
 

5.   Strengthened Enforcement Actions Against FTL Violations

In order to increase the deterrent effect of enforcement actions for increasing violations of the FTL, the Amendment would double the maximum percentage of revenues that can serve as the basis of administrative fines.  Further, the Amendment would specify one’s right to directly seek injunctive relief against ongoing unfair trade practices, and empower the courts to order the submission of materials to help victims substantiate the amount of damages incurred in civil lawsuits.
 

6.   Due Process 

In order to enhance due process, the Amendment would require the KFTC to guarantee one’s right to seek assistance from legal counsel during its processes, including investigations, and also require the delivery of an official letter prior to conducting interviews.
 

Considering the likelihood of the Amendment being passed by the National Assembly, companies engaging in businesses in Korea or those with a Korean nexus may consider closely reviewing the amendment to assess the potential impact it may have on their businesses.