South Korea: Fair Trade Commission
The first and foremost goal of the Korea Fair Trade Commission (KFTC) is to promote fair and free competition. It is the key to sustaining innovative business activities and maximising consumer welfare. Accordingly, as a fair umpire and informative monitor, the KFTC seeks to supervise market players’ compliance with the rules and sanction those who violate them.
Key activities of the KFTC during 2019 include, but are not limited to, the following:
- the KFTC created the information and communications technology (ICT) task force in November 2019 in order to respond effectively to abusive behaviours of dominant firms and other unfair practices in ICT sectors;
- a total of 51 collusive acts, including bid-riggings and international cartels, were slapped with corrective orders and surcharges amounting to 77 billion won;
- the KFTC approved mergers between big players in IPTV and cable TV networks while imposing behavioural remedies, taking into account rapid changes in broadcasting and telecom sectors; and
- the KFTC set up plans to improve 19 restrictive regulations that can impede innovation and unnecessarily burden business activities in sectors such as food, medicine and tourism.
Entering 2020, the KFTC will continue to vigilantly respond to and punish violations such as abuse of dominance, cartels and anticompetitive mergers that may harm innovative economic activities. Regardless of their size or nationality, all companies are treated fairly in law enforcement. In addition to addressing individual infringement cases, the KFTC will also continue to seek structural improvements in markets.
Activities of the KFTC base their legal foundation on the Monopoly Regulation and Fair Trade Act (MRFTA) of 1981. Although partial amendments have been made several times to the MRFTA, the KFTC recognised the need for a complete overhaul taking into account the changes in economic situations over the past 40 years. Accordingly, a draft amendment to the MRFTA was submitted to the National Assembly in November 2018 to improve the law enforcement mechanism, enhance procedural transparency and better focus on enforcement in emerging industries. In the lead up to 2020, the KFTC will keep endeavouring to make the draft amendment pass the National Assembly.
Currently, the KFTC is very interested in promoting innovation competition and secure dynamic efficiencies in ICT sectors. First of all, the Commission is currently deliberating on whether to begin a consent decision procedure for Apple Korea’s alleged abuse of superior bargaining power against mobile carriers. Second, the alleged abuse of dominance by Naver, the leading search engine in Korea, is also pending for the Commission deliberation. Naver has been known to have tampered with its search algorithm to give preference to its paid advertisement customers. Another important action of the KFTC was the creation of a task force team responsible for ICT sector investigations. The ICT task force began its work in November 2019 and is expected to increase effectiveness in handling cases and responding to future litigation processes as well.
The KFTC puts emphasis on reinforcing its actions against abusive unfair practices that occur in sectors closely related to people’s lives. For example, the KFTC levied a corrective order along with 990 million won in surcharges in May 2019 against Korea Vaccine for abusing its dominant position by manipulating the supply of its tuberculosis vaccine in order to maximise its profits. As regards RPM enforcements, the KFTC fined three tire manufacturers 7.87 billion won for forcing their dealers to sell tires at prices above a certain level.
The KFTC will continue to closely monitor unfair practices that hamper innovative competition and consumer welfare in 2020, focusing specifically on abuse of market dominance in ICT sectors including online platforms, intellectual property rights, semiconductors and so on.
In 2019, the KFTC placed importance on cartels related to public safety and health, bid-riggings in public procurement that waste taxpayers money, and international cartels. As a result, the KFTC imposed corrective orders and a total of 77 billion won in surcharges on 51 infringement cases.
In the area of public safety and health, the KFTC imposed corrective orders and surcharges of 7.6 billion won on two companies that rigged bids for contracts to supply blood bags to the Korean Red Cross and referred them to the prosecution. It also sanctioned 17 medical institutions for agreeing to fix the medical examination fee for visa application.
As for the area of public procurement, the KFTC detected bid-rigging conspiracies at auctions of shipping services for imported brown rice, which had been committed between 2000 and 2018. It decided to impose corrective orders and surcharges of 12.7 billion won on the companies involved. The KFTC also imposed surcharges of 13.3 billion won on four companies that rigged bids for government projects to set up dedicated telecommunication lines, and referred them to the prosecution.
Regarding international cartels, the KFTC imposed a total of 9.2 billion won in surcharges on four auto parts suppliers for agreeing to allocate their automaker buyers of alternators and ignition coils. It also levied a total of 693 million won in surcharges along with corrective orders on four foreign banks for fixing prices of foreign currency derivatives.
In 2020, the KFTC will continue to monitor and crack down on cartels directly related to public safety and health, bid-riggings in public procurement, and international cartels.
The KFTC reviewed more than 750 merger cases notified in 2019 and made in-depth examinations for 18 cases. As a result, the KFTC imposed remedial measures on five cases that were found to have substantial competitive concerns.
The prime cases were the acquisition of T Broad by SK Telecom/Broadband and the acquisition of CJ Hello by LG U+. Both mergers were tie-ups between IPTV networks and cable TV operators that happened to occur in the reshuffling process of pay-TV services in response to the digitalisation and convergence of broadcasting and telecommunications markets. The KFTC thoroughly investigated the proposed mergers with diverse methods such as conducting economic analysis and collecting opinions from various stakeholders. Consequently, the KFTC approved the mergers, taking into account the revolutionary changes in broadcasting and telecom markets, while imposing behavioural remedies that limit price increase and prohibit coercion of product switches in order to prevent consumer harm.
The merger between SK Telecom and three local broadcasters was the first merger case in OTT (over-the-top) services reviewed by the KFTC. Being concerned that the tie-up between Korea’s top mobile carrier and the largest OTT service provider could significantly foreclose rivals by restricting their access to a sufficient customer base, the KFTC imposed behavioural remedies that require the merging parties to negotiate with their rivals on reasonable and non-discriminatory terms. The other two mergers on which the KFTC imposed remedies were Dongbang and four other companies’ establishment of a joint venture for managing the port of Incheon, and Global Taxfree’s acquisition of KTIS’ stocks.
Meanwhile, in an attempt to specify criteria for assessing the competitive effects of mergers in innovation-based industries and to effectively address the concerns of monopolisation through buying out potential competitors, the KFTC made an amendment to its Merger Review Guidelines in February 2019.
This year, the KFTC will closely review mergers in sectors that have a significant impact on relevant markets and raise much interest from the public, from ship-building to platform-based services like food delivery apps.
In 2019, with the aim of boosting innovative growth and economic vitality, the KFTC set up plans to improve a total of 19 restrictive regulations. It is prioritising regulations that prevent innovation, and aims to alleviate the burden of small and medium-sized businesses, and to ease the inconvenience in people’s lives. Examples include expanding the scope of human medical waste that can be recycled and of the visa-free stay programme to regional airports.
Previously, all medical wastes were prohibited from being recycled except for test and research purposes. Even if new technologies that produce cosmetic preparations using waste fat or waste teeth were developed, they could not be commercialised. In this regard, the government is planning to revise the relevant law so that medical waste such as fat and teeth can be recycled. This change will support the innovation activities of companies inducing new technology developments in the bio industry, which has a high potential for growth.
The visa-free programme, which allows foreign passengers without visas to participate in a tour programme and stay in Korea for up to 72 hours, is currently available only for those transferring through Incheon International Airport. This programme will soon be available at regional airports as well. This expansion is expected to boost the local economy by attracting more transit passengers to regional airports.