Korea: Fair Trade Commission

Amid internal and external economic uncertainty, the Korean government is committed to revitalising the economy and enhancing consumer welfare. The Korea Fair Trade Commission (KFTC) is also devoted to improving law enforcement and systems, with the aim of realising a fair and vibrant market.

The KFTC has been making every endeavour to establish a principled market economy, and based on this, achieve concrete and tangible results that will actually affect people in 2016.

Under this policy goal, in 2016 the KFTC focused on: preventing the creation of monopolistic market structures; detecting and rectifying cartels that would be detrimental to the government’s financial condition; deterring unfair practices in the public sector; and promoting competition in the digital market.

M&A

In 2016, the KFTC prohibited and imposed measures on anti-competitive merger transactions in order to deter the creation of monopolistic market structures.

One of the major merger cases among domestic companies in Korea was a transaction involving the acquisition of CJ HelloVision (CJH) by SK Telecom (SKT). SKT, a wireless carrier that owns IPTV operator as a subsidiary, was negotiating a deal to acquire CJH, which is a pay-TV service provider and mobile virtual network operator.

After a review, the KFTC concluded that this M&A deal could raise competitive concerns, leading to a substantial lessening of competition in the pay-TV, retail and wholesale telecom markets. Therefore, the KFTC made a final decision not to approve the SKT’s takeover of CJH, concluding that it is difficult to address anticompetitiveness by behavioural remedies or selling a part of its assets.

Moreover, as for the merger deals of multinational companies in Korea, the KFTC also imposed measures on them to sell off their assets in order to protect competition in the domestic market.

After reviewing the merger deal in the animal health business between Boehringer Ingelheim International and Sanofi, it decided that the transaction could restrict competition and intensify monopoly or oligopoly in the vaccine and pharmaceutical market.

Based on this judgment, the KFTC imposed remedies on one company to sell off its assets and allow the buyer to be licensed with the intellectual property rights.

The KFTC also sent an examination report that specifies the merger between Lam Research and KLA-Tencor, the semiconductor fabrication equipment makers, can significantly hinder competition in the semiconductor fabrication equipment market.

The two companies voluntarily called off a planned merger during the KFTC’s deliberation process.

Cartels

In 2016, the KFTC has mainly detected and rectified cartels that put a burden on people’s livelihoods or that would be detrimental to the government’s financial condition. From January to November, remedies have been imposed on a total of 37 cartel cases, with penalty surcharges amounting to approximately 745 billion won.

One of the major cases was a cartel in the paper industry. The KFTC has detected cartel practices that have been going on for years, at all levels from the purchase of raw materials and manufacturing process to the sale of the finished goods. A total of 45 companies involved in five cartel cases have been imposed with remedies and fined approximately 214 billion won.

It is all the more meaningful in that the KFTC revealed harmful consequences of cartels by detecting cartels for which the consumers are unaware of their impacts, even when those cartels affect the price of the finished goods, such as parcel boxes, snacks and cosmetics boxes.

Furthermore, the KFTC detected international cartels in the auto parts bids such as compressors and starter motors, and imposed remedies and fines of around 11.1 billion won and 1.14 billion won, respectively.

Other cartel cases that have been detected and rectified include public-sector bid riggings, such as LNG container tank bid rigging and non-destructive testing service bid rigging, and FX swaps conspiracy by foreign banks.

The KFTC intends to constantly keep monitoring and sanctioning cartel practices that harm the public sector or areas that are closely related to people’s livelihoods and international cartels that are detrimental to domestic companies and consumers.

In addition, along with the effort to enhance its cartel enforcement, the KFTC is stepping up its institutional efforts to preemptively prevent and detect cartels. A consultative body for fighting bid rigging has been founded with major bidding institutions such as Public Procurement Service and Korea Electric Power Corporation, so as to monitor bid riggings by sharing information such as imposed measures by the KFTC, and examples of monitoring and preventing cartels.

The KFTC also managed activities to prevent cartels in advance by holding seminars for companies, enterprisers’ organisations and law firms, etc, and introducing legislations and systems regarding cartels home and abroad and trends in law enforcement to enhance understanding of cartels.

Public sector and digital market

The KFTC has been pursuing the improvement of unfair trading practices of public enterprises in public sectors having a large impact on private sectors to establish fair trading practices.

This year alone, unfair trading practices of public enterprises such as Incheon International Airport Corporation’s unfair cutting of construction costs and Seoul Metropolitan Rapid Transit’s abuse of trade position have been corrected.

As a part of the efforts to correct unfair practices in sectors closely related to people’s livelihood, the KFTC imposed remedies on Merial Korea that hampered competition by blocking the distribution of drugs for pets in pets’ pharmacies.

Likewise, the KFTC revised Guidelines on Unfair Exercise of Intellectual Property Rights on March 2016 to promote competition in the digital market.

The definition of standard essential patent (SEP) has been altered to make the regulations against SEPs more reasonable, so as to promote a fair exertion of patent rights by innovative companies.

Before the revision, the definition of SEP included de facto SEPs, which became an industry standard as a result of the fierce market competition. Some concerns were raised that it would be inappropriate to regulate de facto SEPs in the same way with SEP that had been adopted as standard by standard-setting organisations (SSOs)on the premise that FRAND commitments are voluntarily declared.

Thus, the revised guidelines stipulate that only the patents selected by SSOs shall be regulated as SEP, and de facto SEPs to be regulated in the same manner as general patents.

Seoul International Competition Forum and beyond

The KFTC biennially hosts Seoul International Competition Forum to share global competition law experts’ experiences and knowledge. This year marked the ninth anniversary of the forum, which invited various experts from major competition authorities, the OECD, academia and legal circles, etc. They participated as speakers and discussed new markets and new types of transactions, such as aftermarket, MFN clauses on online platforms and information exchanges among rivals. It was a good opportunity to go through and deliberate on competition law issues that have been newly emerging in this changing era.

Markets are moving alive and the breadth and patterns of that movement will only grow and be diversified with the arrival of the digital economy era. Accordingly, the challenges that the antitrust enforcers will encounter will get fiercer. The KFTC will continue to intensely ponder over such challenge, and will continuously strive to serve its duty as the enforcer of competition law.