This article was published on March 7, 2025, at 11 a.m. on the ChosunBiz RM Report site.
The Fair Trade Commission is reviewing amendments to the law to ensure the consistency of penalty surcharges stipulated in the so-called 'three distribution laws,' including the Large-Scale Retail Business Act, the Franchise Business Act, and the Agency Act. The three distribution laws are special laws created to prevent unfair transactions by large distribution companies and to protect small businesses. Since the methods for calculating penalty surcharges vary, there is a problem where the surcharges are calculated smaller than when applying the main Fair Trade Act.
According to the government on the 7th, the Fair Trade Commission plans to begin a study to secure the consistency of the penalty surcharge imposition system among distribution-related laws soon. Based on the results of this research, the Fair Trade Commission plans to promote legal amendments to rationally organize the penalty surcharge imposition criteria among the Large-Scale Retail Business Act, the Franchise Business Act, and the Agency Act.
The special laws derived from the Fair Trade Act, namely the 'three distribution laws,' have different methods of imposing penalty surcharges. First, the Franchise Business Act is based on 'related sales' with a ceiling of 2% of the related sales. The fact that the calculation is based on related sales is similar to the Fair Trade Act.
The Large-Scale Retail Business Act is based on 'supply prices' (or related rents), while the Agency Act bases it on 'amount of law violation.' All three laws impose a fixed penalty surcharge of 500 million won in cases where it is difficult to determine the amount.
The problem is that penalty surcharges may be underestimated when regulated by such special laws. For example, in cases where it is difficult to clearly measure the supply price or the amount of law violation for imposing a penalty surcharge under the Large-Scale Retail Business Act or the Agency Act, they can only impose a fixed penalty surcharge of 500 million won. A Fair Trade Commission official noted, "Under the Fair Trade Act, it can impose 2% as long as there are related sales, but if only fixed penalty surcharges can be imposed through special laws, there is a tendency for the surcharges to be underestimated."
The Fair Trade Commission has reportedly internally shared the recognition that penalty surcharges may be lower under the distribution laws than when enforcing the Fair Trade Act. The intention of defining this in the special law, the Large-Scale Retail Business Act, was to strictly regulate the management interference acts of large distribution companies, but it can result in weaker sanctions.
A representative case is when Coupang imposed a penalty surcharge of 3.3 billion won after applying the prohibition on abuse of market dominance under the Fair Trade Act for demanding suppliers to raise the selling price on competing online malls to maintain the lowest price for its own products in 2021. At that time, the sanctions were based on the Fair Trade Act, so related sales became the standard amount for the penalty surcharge. However, if the same situation occurs now, the penalty surcharge should be calculated based on the related supply price under the Large-Scale Retail Business Act. For reference, this case was overturned last year by the appellate court, resulting in a cancellation of the Fair Trade Commission's sanction.
The Fair Trade Commission is known to share the internal recognition that the same action could result in lower penalty surcharges under the distribution laws than enacting under the Fair Trade Act. Defining this in the special law, the Large-Scale Retail Business Act, was aimed at strictly regulating management interference behaviors by large distribution companies, but it could lead to weaker sanctions.
A Fair Trade Commission official stated, "In some cases, penalty surcharges may become weaker than under the Fair Trade Act, and we aim to address those aspects." The Fair Trade Commission plans to complete its research in the second half of this year and prepare specific proposals to continue revising laws and notifications.
Previously, the Fair Trade Commission conducted a study on improving the penalty surcharge imposition system limited to the Franchise Business Act and the Large-Scale Retail Business Act during the tenure of former Fair Trade Commission Chairman Cho Sung-wook in 2020. The research team at Sungshin Women's University proposed a legal amendment to change the penalty surcharge calculation standard under the Large-Scale Retail Business Act from 'supply price' to 'amount of law violation' and to slightly increase the ceiling of fixed penalty surcharges for the Large-Scale Retail Business Act and the Franchise Business Act from the current level, but the amendment was not made.
The research team explained the reason for proposing this alternative: "In the case of the Large-Scale Retail Business Act, it is excessively common to impose fixed penalty surcharges due to difficulties in specifying related supply prices or related rents, resulting in large discrepancies in the amount of surcharges imposed between violating businesses.