Competition Law and Policy of the Republic of Korea
| Author | Meong-Cho Yang |
| DOI | 10.1177/0003603X0905400304 |
| Published date | 01 September 2009 |
| Date | 01 September 2009 |
| Subject Matter | Article |
Competition law and policy
of the Republic of Korea
BY MEONG-CHO YANG*
I. INTRODUCTION
A. History of antitrust legislation in Korea1
Early in 1964, the Korean Economic Planning Board (EPB, now
defunct) formulated a draft of the Fair Trade Law and held a public
hearing on it but was frustrated in going ahead because of the strong
opposition in business circles. Afterwards, several pieces of antitrust
legislation were submitted to the National Assembly by the Executive.
Those bills, however, were abandoned due either to the termination of
the Assembly session or the dissolution of the National Assembly.
To curb the soaring prices of commodities, the EPB studied
price control schemes in 1975. The Price Stabilization and Fair
Trade Act (PSFT Act) was enacted in late 1975. It was aimed prima-
* Professor of Law, Ewha Womans University; Commissioner, Korea
Fair Trade Commission.
AUTHOR’S NOTE: I gratefully acknowledge the comments and suggestions of Professor
Toshiaki Takigawa and Dr. Mark Willliams. The views expressed herein are solely
mine and should not be attributed to the Korea Fair Trade Commission.
1
For a more detailed discussion of Korea’s early attempts to introduce
competition law, see Youngjin Jung & Seungwha Chang, Korea’s Competition
Law and Policies in Perspective, 26 NW. J. INT’L L. & BUS. 687, 688–94 (2006).
© 2009 by Federal Legal Publications, Inc.
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rily at price restraints, while the prohibitions against cartels and
unfair business practices were secondary means for limiting exces-
sive prices.
Though the PSFT Act had provisions against cartels, only three
cartel cases were challenged by the authorities from 1976 through
1979. Thus, even after the promulgation of the PSFT Act, the govern-
ment did not show an active attitude toward regulating cartels.
Rather, it approved several rationalization or depression cartels.
Under the permission or patronage of the government, more than 250
trade associations were newly organized during that period and oper-
ated actively. Emphasizing short term price stabilization, the PSFT Act
did not reach market structure; rather, it regulated nothing but market
behavior. It was primarily a price control law, and cartel regulation
was to be utilized as a means of short term price stabilization.
In the latter half of the 1970s, it was realized that ever-increasing
business concentration had resulted in reduced competitiveness of
domestic enterprises in world markets and imbalance in the national
economy. In 1979, eighty-nine percent of the industrial goods produced
in Korea were manufactured by monopolists or oligopolists; only eleven
percent of the industrial goods were manufactured under competitive
conditions.2
The Constitution of the Fifth Republic includes an antitrust provi-
sion which states: “Abuses of monopoly or oligopoly shall be appro-
priately regulated and adjusted.”3 In September 1980, the government
made public a plan to enact the Monopoly Regulation and Fair Trade
Law before the end of the year, which purported to regulate monopo-
lies and restore functioning markets and then to convert the basis of
the national economy from the system of direct control through
administrative patronage or subsidization to a more competitive sys-
tem of private initiatives. The government also proclaimed its plan to
abolish various kinds of special economic laws and regulations that
had hindered competition among industries.
2
Economic Planning Board, National Economy White Paper 81, 100–01
(1998) (on file with author).
3
Constitution of the Republic of Korea, No. 9 of 1980, art. 120, ¶ 3.
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Administrative officials studied the relevant legislation of leading
countries with consideration to the economic situation of Korea and
made a draft. The Monopoly Regulation and Fair Trade Act (MRFT
Act) was passed by the Legislative Council on December 23, 1980.4 The
MRFT Act was promulgated by the President on December 31, 1980,
and came into force on April 1, 1981. It was extensively revised in
December 1986, in January 1990, in December 1994, in December 1996,
in December 1999, in December 2004, and in April and July of 2007.5
B. Future emphasis of competition law enforcement
Several points should be noted with regard to the enforcement of
the MRFT Act in the coming years. The current antitrust legislation
accepts the existence of monopolies and oligopolies but tries to correct
abuses of market power. Some apparently abusive acts had previously
been overlooked on the basis that they were longstanding business
practices, even though such practices would not have been acceptable
in a competitive market. The MRFT Act now has a programmatic pro-
vision declaring its aim to move toward the divestiture of
monopolies.6 Quite recently the government declared that it would
enforce the law more vigorously against market-dominant enterprises.
To achieve the efficient enforcement of the antitrust law, the
expansion of the leniency program and invigoration of private
enforcement have been emphasized. Most large enterprises are very
well aware of the benefit of the new leniency procedures imple-
mented by the Korean antitrust authority, the Fair Trade Commission
(KFTC).7 Nevertheless, clear differences of opinion exist between the
business community and the authorities. Leniency applicants contend
that full disclosure of attainable evidence should suffice to obtain
exemption from penalties. On the other hand, the authorities view a
4
Monopoly Regulation and Fair Trade Act, Law No. 3320 of 1980.
5
For revisions of the MRFT Act, see http://eng.ftc.go.kr/files/bbs
/2008/MARFTA.rtf.
6
Id. at art. 3.
7
For general information about the KFTC, see http://eng.ftc.go.kr
/about/overview.jsp. (last visited July 28, 2009).
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leniency application as if it were a guilty plea or confession of the
crime. The KFTC officials are not sympathetic to a respondent’s con-
tention about the illegality of its alleged antitrust violation after its
submission of leniency application.
A better balance of administrative enforcement and private
enforcement would be ideal. The antitrust legislation and the KFTC
have invented a variety of methods to boost private damage actions.
Punitive damages or treble damages have been suggested in acade-
mia. However, their effectiveness is limited by the victims’ incen-
tives. Efficient judicial proceedings have to be established in order to
energize private remedial actions. Finally, the KFTC routinely
stretches the MRFT Act overseas to pursue and regulate anticompeti-
tive behavior by foreign companies located in foreign jurisdictions.
Global cartel enforcement is probably the most glaring example of
this trend.8
II. OBJECTIVE OF COMPETITION LAW
AND AGENCY DESIGN
A. Objective of the MRFT Act
Unlike the competition laws of other jurisdictions, the MRFT Act
has an article declaring its legislative purpose.9 This article empha-
sizes three objectives: (i) to encourage creative business activities; (ii)
to protect consumers; and (iii) to strive for balanced development of
the national economy. To achieve these objectives, the Act presents its
purpose as promoting fair and free competition and provides specific
tools for the promotion of competition: preventing abuse of market-
dominant position; preventing excessive concentration of economic
power; regulating improper concerted acts; and regulating unfair
business practices.
The MRFT Act’s three objectives indicate that its purpose is not
limited to consumer welfare. The objective of encouraging creative
8
See Julian M. Joshua, Peter D. Camesasca & Youngjin Jung, Extradition
and Mutual Legal Assistance Treaties: Cartel Enforcement’s Global Reach, 75
ANTITRUST L.J. 353 (2008).
9
MRFT Act, art. 1.
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business activities is understood to include innovation in production
or service markets that leads to enhancement of efficiency and finally
to consumer welfare. The third objective of the Act, the balanced
development of the national economy, could be misconstrued as mere
rhetoric. However, it reveals that consumer welfare may not always
be the paramount goal of this legislation and that the national interest
could outweigh consumer welfare in some situations.
In Korea, harmonized growth among geographic regions is highly
stressed and boosting or supporting small businesses is one of the top
priority issues to be addressed by the administration. Global competi-
tiveness is another national interest that might compromise a pure
consumer welfare objective in some instances.
B. The Korea Fair Trade Commission
1. CHANGES OF ENFORCEMENT AGENCY—Although the courts may
participate in antitrust enforcement in private antitrust actions and
through review of the administrative decisions, the KFTC is mainly
responsible for undertaking investigations and taking corrective
measures in respect of antitrust violations. Before the 1990
amendment of the MRFT Act, the KFTC was an advisory body to the
Minister of the EPB (EPB Minister), and the EPB Minister assumed the
ultimate responsibility for administrative antitrust enforcement. The
1990 amendment transferred antitrust jurisdiction from the EPB
Minister to the KFTC, but the KFTC still...
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