On January 8, 2025, the Korea Fair Trade Commission (the “KFTC”) announced its key initiatives for 2025 with the objective of “establishing a foundation for fair trade practices for the recovery of people’s livelihoods and preparation for the future” (the “2025 Plan”).
The KFTC’s 2025 Plan sets forth the following four key tasks: (i) enhancing the economic vitality of small and medium-sized enterprises (“SMEs”) and small business owners, (ii) promoting innovative competition for future preparedness, (iii) strengthening consumer protection and enhancing consumer rights, and (iv) improving the operation of the large business groups system. Additionally, the KFTC proposed streamlining case management processes and reinforcing support for companies harmed by anticompetitive conduct as the basis for implementing the 2025 Plan.
The 2025 Plan represents an extension of the policy direction established in 2024, while refining and developing it with more specificity. In particular, it focuses on enhancing the monitoring/inspection activities and regulatory overhaul in the technology and digital sectors, which tend to have significant ripple effects on the Korean economy. We summarize below the key details of the 2025 Plan.
- Enhancing Economic Vitality of SMEs and Small Business Owners
This year, the KFTC is expected to focus on policies related to SMEs and small business owners, with particular emphasis on subcontracting and distribution. Regarding subcontracting, the KFTC plans to focus on ensuring stable payments for subcontracting works by pursuing comprehensive measures, including (i) narrowing the grounds for exemptions from payment guarantees, (ii) expanding the scope of direct payments to be made by project owners, (iii) limiting third parties’ ability to seize payments intended for subcontractors, and (iv) prohibiting unreasonable “retention money” clauses in subcontracting agreements.
In the distribution sector, the KFTC plans to focus on policies to ensure timely payment for delivered goods. For example, the KFTC will impose an obligation to comply with payment deadlines and separately manage sales proceeds to be remitted to merchants on online intermediary platforms. This new policy also aims to shorten the settlement periods for transactions involving traditional retail businesses by reassessing the appropriateness of settlement periods for direct purchases and special contract purchases.
The KFTC has also announced plans for intensive inspections of unfair business practices found in the distribution sector, such as (i) illegal avoidance of the variable subcontract price system, and (ii) payment delays and cost-shifting in the online shopping industry. To protect franchisees and to alleviate the burden on small business owners, the KFTC also intends to (i) introduce a franchise information disclosure system, (ii) guarantee the franchisees’ right to form associations, and (iii) intensify monitoring of the unfair practices of online platforms (e.g., food delivery app’s self-preferencing and demand for Most-Favored Nation (“MFN”) treatment).
- Promoting Innovative Competition for Future Preparedness
The KFTC plans to focus on monitoring collusion in four key sectors: (i) health and safety, (ii) food, clothing and housing, (iii) construction and intermediate goods, and (iv) public procurement. The KFTC will also enhance monitoring activities to detect new types of collusion by utilizing artificial intelligence (“AI”) and other emerging technologies, while also strengthening the oversight of unfair practices in existing core industries (e.g., telecommunications, automotive and semiconductors) and next-generation industries (e.g., strategic high-tech, software, content and industrial machinery). As such, the KFTC will specifically target unfair subcontracting practices and technology misappropriation preying on innovative SMEs and startups.
The KFTC will continue to pursue legislation aimed at swiftly eliminating four major types of anti-competitive conduct displayed by monopolistic platforms (i.e., self-preferencing, tying, restrictions on multi-homing and demand for MFN treatment) across six service areas (i.e., intermediation, search, social media, video, operating systems and advertising) within the platform market. Furthermore, the KFTC will closely examine unfair practices by subscription-based, vertical and mobile platform companies as well as deceptive practices by overseas online platforms.
- Strengthening Consumer Protection and Enhancing Consumer Rights
The KFTC will (i) mandate the disclosure of information related to the collection and processing of reviews by online sellers (such as posting periods and deletion criteria), (ii) enhance consumer rights by updating outdated regulations to better align with the realities of digital transactions (e.g., adjusting the scope of personal information collection on Consumer to Consumer (“C2C”) platforms and establishing refund policies for subscription-based services like Over-The-Top (“OTT”) platforms), and (iii) implement measures to prevent consumer harm in new types of transactions (such as achieving higher refund rates for new-type gift certificates and reviewing the terms and conditions related to the transfer and refund of gift certificates, conducting a fact-finding survey into AI washing practices and amending consumer harm prevention guidelines related to transactions that take place at temporary exhibitions like pop-up stores) and global direct purchase transactions (such as mandating the designation of local agents for overseas platforms and establishing guidelines to prevent the distribution of harmful or uncertified products via overseas platforms).
- Improving Operation of Large Business Groups System
In terms of monitoring and sanctioning unfair intragroup transactions, the KFTC plans to focus on sectors largely occupied by SMEs (e.g., food services and building maintenance) and industries that are closely linked to people’s livelihoods (e.g., real estate and healthcare). In addition, by coordinating and sharing information with expert advisory committees and relevant government agencies, such as the National Tax Service and the Bank of Korea, the KFTC will enhance its monitoring and detection systems for unfair intragroup transactions and improve the system of imposing fines for illegal activities aimed at evading regulations on large business groups.
Meanwhile, the KFTC is expected to revamp its systems and procedures to ensure more effective enforcement activities. In light of changes in the economic landscape, the KFTC has outlined plans to revise its policies concerning large business groups by (i) modifying the criteria for designating business groups required to make public disclosures, linking the new criteria to Gross Domestic Product (“GDP”), (ii) broadening the scope of entities to be excluded from large business group affiliation, such as independently operated companies led by executives from non-profit organizations, and (iii) relaxing regulations on Corporate Venture Capital (“CVC”) to encourage the discovery of and investment in startups. Furthermore, the KFTC aims to reduce the burden on business groups when preparing designation-related documents by (i) streamlining the submission process for primary designation materials through the business group portal (“eGroup”), and (ii) eliminating the requirement to submit duplicate information about corporate status and financials, which can be easily retrieved from the Repository of Korea’s Corporate Filings (the “DART”).
- Streamlining Case Management Processes and Enhancing Support for Companies Harmed by Anticompetitive Conduct
The KFTC plans to implement several measures aimed at improving case management and supporting companies disadvantaged by anticompetitive behavior. These measures include the following: (i) imposing steeper fines on habitual offenders, (ii) clarifying the scope and criteria for the disclosure of its decisions, (iii) promoting the “Fair Trade Voluntary Compliance Program (“CP”)” while bolstering the credibility of CP evaluations, and (iv) improving systems for collecting, submitting and managing digital case materials while maintaining their evidentiary value and integrity.
Furthermore, the KFTC has announced initiatives to enhance support for companies harmed by anticompetitive conduct. As part of this effort, the KFTC will (i) pursue legislation to integrate dispute resolution regulations currently spread across six separate statutes, (ii) establish a “Comprehensive Fair Trade Support Center,” (iii) expand the use of the court’s production order system, where “trade secret” is not recognized as a legitimate basis for refusing to produce evidence necessary to establish liability and damages, and (iv) take on the responsibility of providing the court with evidence in its possession that cannot be obtained through production orders against the parties.
In the 2025 Plan, the KFTC has expressed the importance of proactive enforcement of fair trade policies in response to the difficult market environment and the need for new growth engines. In particular, the KFTC faces the difficult task of balancing the need to address challenges, such as economic slowdown and increased economic instability that arise from both domestic and external uncertainties, with the opportunities presented by the expansion of the digital economy and online platforms. Accordingly, companies are advised to carefully assess their compliance with relevant laws and regulations and to stay informed on recently introduced regulations or proposed amendments in order to effectively prepare for their business activities.