SOUTH KOREA: An Introduction to Competition/Antitrust
The Korean Response to COVID-19 and Its Effect on Competition
The outbreak of COVID-19 has reshaped the economic conditions of South Korea. The shift to the digital economy accelerated, resulting in a significant increase in the use of online and non-face-to-face transactions. On the one hand, the growth of online platforms promoted the development of new services and businesses, while on the other , issues related to the market dominance of large online platforms have increasingly been raised. In addition, due to the slow economic recovery that the world has experienced in the wake of the pandemic, private firms continue to face difficulties in Korea. One of the biggest concerns is that the rise in raw material prices and the economic recession will aggravate the sufferings of small and medium-sized enterprises (SMEs), small business owners, and consumers. Against this backdrop, from a legal point of view, there is growing demand for a guarantee of due process rights in the law enforcement process and the quick and efficient remedying of harm.
By taking such economic conditions into account, the Korea Fair Trade Commission (KFTC) announced, in January 2023, the following goals for the next 12 months:
– resolving the causes of the impairment of innovative developments and the restraint of competition in the digital market;
– prohibiting unfair practices that add to the burden on SMEs, small business owners, and consumers; and
– improving the law enforcement system in a way that will guarantee due process rights and ensure swift remedies for harm done.
As discussed below, the KFTC has presented various work plans for different fields and is active in introducing new laws and systems to realise its goals.
Proposed KFTC activity
In 2023, the KFTC plans to focus its monitoring activities on abuses of dominance (eg, interference with the businesses of competitors) in the digital-based industries (eg, semiconductor and app market) and core platform fields (eg, mobility and open market), to create a market environment that promotes innovation and competition. Relatedly, on 12 January 2023, the KFTC adopted the Guideline on the Review of Online Platform Operators’ Abuse of Market Dominance, which provides guidance on how the Monopoly Regulation and Fair Trade Act (MRFTA) should be interpreted with respect to abuse of market dominance of online platform operators. In addition, the KFTC plans to conduct a thorough review of M&A in the gaming and cloud industries and M&A involving big tech. At the same time, improvements to the M&A review system will also take place. Indeed, on 14 February 2023, the KFTC announced the proposed amendment to the MRFTA (the “Proposed Amendment”). The Proposed Amendment may be implemented as early as the first half of 2023, although the timeline for its implementation will depend on the timing of the National Assembly’s review of the Proposed Amendment. The Proposed Amendment includes two major changes to the Korean merger control regime: (i) to expand the scope of transactions that enjoy exemptions from merger filing requirements, and (ii) to allow companies to submit voluntary remedy proposals to the KFTC and obtain conditional clearance. Furthermore, tighter regulation of cartel activities in the energy, communication equipment, intermediate goods, and the platform fields, as well as strict measures to control unfair trade practices in the online content or app markets are expected.
As a way to achieve its goal of protecting SMEs, small business owners, and consumers, the KFTC plans to monitor unfair subcontracting practices in the software and content-production fields and tighten regulation of unfair practices regarding payments and misappropriation of technical information owned by subcontractors. In addition, the KFTC’s plan regarding the franchising industry is to protect franchisees, prevent large distributors from interfering with the management of suppliers, and induce platforms and sellers to voluntarily improve their trade practices in the platform field. The KFTC further plans to (i) regulate deceptive advertising in the online market to protect the rights and interests of consumers, (ii) support online platform companies to voluntarily come up with ways to resolve disputes to prevent consumer harm, and (iii) introduce additional systems for consumer safety.
The KFTC’s plan to improve the law enforcement system entails (i) specifying the conduct subject to investigation and the time period in the notice of investigation provided during on-site investigations, (ii) establishing a procedure by which the examinee may request the return or disposal of materials collected by the KFTC that fall outside the scope of the investigation, and (iii) setting a standard for investigation of compliance departments. Moreover, the KFTC will provide an opportunity for examinees to meet with the KFTC’s director of division before the KFTC’s decision on a case, and for certain cases, mandatorily hold two or more hearings and thereby increase the opportunity for examinees to present their opinions. The KFTC is also reviewing the introduction of dispute resolution procedures for the timely remedy of harm.
As such, the KFTC is expected to actively enforce the law in various fields in 2023 to promote competition and protect SMEs and consumers, while maintaining the self-regulation policy goal. Global companies are encouraged to keep watch on the competition and antitrust developments in South Korea, particularly given the KFTC’s plan to intensively monitor online platform companies and online content industries and introduce various systems to protect small businesses and consumers. Companies are advised to consult with local firms with respect to the details of various systems that guarantee due process rights which are expected to be introduced by the KFTC.