The review process by the Fair Trade Commission, which has announced a penalty surcharge of over 5 trillion won for the three major telecommunications companies suspected of colluding over sales incentives (rebates), is in its final stages. However, there are concerns in and outside the industry that the penalty surcharge may be postponed amid the chaotic impeachment situation.
According to industry sources on the 10th, the Fair Trade Commission will hold plenary sessions on the 19th and 26th of this month to review the case involving the suspected collusion over sales incentives by the three major telecommunications companies. The Fair Trade Commission had previously conducted a preliminary opinion gathering procedure against the three telecommunications companies, Korea Information & Communication (KICC), and the Korea Communications Commission on the 4th. The Fair Trade Commission has indicated that it may impose a penalty surcharge of up to 5.5 trillion won on the three telecommunications companies.
◇ 'Impeachment situation' and 'amount of penalty surcharge' are variables
Given the current pace of the Fair Trade Commission's review process, the industry expects a final conclusion by March of this year. However, there are also discussions that the Fair Trade Commission may not rush to impose penalty surcharges amid the impeachment situation. An industry official noted, "With significant political uncertainty, it is burdensome for the Fair Trade Commission to impose a trillion-won penalty surcharge on private corporations during this time," adding, "There is a high possibility that action will be taken after the tumultuous political situation stabilizes."
It is also pointed out that the scale of the penalty surcharge anticipated by the Fair Trade Commission is excessive enough to exceed the annual operating profits of the three telecommunications companies. The operating profit of the three telecommunications companies last year is estimated at about 3 trillion won. Therefore, there is speculation that the Fair Trade Commission may make a concession and reduce the penalty surcharge. Kim Kyung-won, a distinguished professor at Sejong University, stated, "If the penalty surcharge is excessive, the cost burden may be passed on to consumers, and it may also hinder investment in new businesses such as artificial intelligence (AI) and 6G (6th generation mobile communications)," and "I believe that some reduction will be considered even if a penalty is imposed."
On the other hand, there are claims that the Fair Trade Commission will not agree to a reduction. An adjunct professor at Chung-Ang University, Ahn, remarked, "The Fair Trade Commission is unlikely to move towards a reduction even if it means changing its calculation method for the penalty surcharge," adding, "I believe there will be no deviation from the amount announced by the Fair Trade Commission." The minimum penalty surcharge announced by the Fair Trade Commission is 3.4 trillion won.
◇ If no 'separate agreement' is found among telecom companies, the penalty surcharge will be 'nullified' even if imposed
The key issue in this case is whether the Fair Trade Commission can impose a penalty surcharge on the three telecommunications companies for collusion even though they followed the administrative guidance of the government (Korea Communications Commission). Previous rulings in similar situations indicate that the courts deemed any penalty surcharge imposed for collusion invalid if it could not be proven that there was a 'separate agreement' for collusion.
A representative case is the 'beer price collusion' incident. In 1998, the National Tax Service had the beer companies, including Hite and Doosan, obtain approval for a price increase limit from the Ministry of Strategy and Finance (now the Ministry of Economy and Finance). The Ministry allowed only a single-digit increase rate as a guideline. Based on this, the beer companies increased prices, but the Fair Trade Commission imposed a total penalty surcharge of 1.1 billion won, stating, "Even with administrative guidance, it constitutes collusion." They argued that while the Ministry of Strategy and Finance instructed that the average price increase rate should be within a single digit, the beer companies did not autonomously increase prices within that range but colluded to raise them.
As a result, the beer companies filed lawsuits against the decision. In a 2003 Supreme Court ruling, it was determined that there was no collusion because there was no 'separate agreement' among the beer companies, canceling the Fair Trade Commission's penalty surcharge. An industry official noted, "If the Fair Trade Commission moves forward with imposing a penalty surcharge without proving the existence of a 'separate agreement' among telecommunications companies, it is expected that the penalty surcharge will be canceled in court, even if it takes time."
◇ If the 'principle of priority of special law' is applied, the Fair Trade Commission cannot intervene
Some argue that the Fair Trade Commission's involvement in regulating telecommunications companies under the Fair Trade Act (Monopoly Regulation and Fair Trade Act) constitutes overreach. The Fair Trade Act is a general law, while the Special Law, the Telecommunications Business Act (Article 50), has specific regulations banning unfair trading practices by telecommunications companies. Professor Ahn stated, "The Telecommunications Business Act has provisions banning unfair trading practices by telecommunications companies, and the competent authorities for this law are the Ministry of Science and ICT and the Korea Communications Commission," adding, "Using the general Fair Trade Act to sanction telecommunications companies amounts to overreach. If the principle of priority of special law is applied, then regulation should only occur under the Telecommunications Business Act, not the Fair Trade Act."
In response, a Fair Trade Commission official explained, "While the Telecommunications Business Act regulates unfair competitive practices (collusion), the Fair Trade Act directly regulates unfair collusive practices, allowing for intervention."
Last April, the Fair Trade Commission sent a review report (similar to a prosecution indictment) to the three telecommunications companies, alleging that they colluded to adjust sales incentives by reducing them when there were many number porting transfers from 2015 to 2022 and increasing them again when there were few transfers. In response, the telecommunications companies countered, "We only followed the administrative guidance from the Korea Communications Commission to limit the scale of sales incentives to prevent excessive competition."
However, the Fair Trade Commission insisted that the telecommunications companies colluded beyond the range of the Korea Communications Commission's administrative guidance and pushed the investigation forward. Afterward, the Korea Communications Commission took a position that it was not collusion as it occurred within the guidance scope. However, the Fair Trade Commission referred the case to a plenary session. The Fair Trade Commission is expected to finalize its decision regarding the penalty surcharge after the two plenary reviews scheduled for this month.