The Fair Trade Commission said on the 19th it will sharply raise penalty surcharges on corporations that repeatedly break the law. If an entity is caught again after a first sanction, a plan is being pushed to impose up to double the penalty surcharge.
The Korea Fair Trade Commission (FTC) said at a policy briefing held that day at the Government Complex Seoul annex that it will overhaul the imposition criteria and calculation system so that penalty surcharges function properly as a means of preventing violations.
First, it will strengthen the aggravating criteria for repeat violations. Currently, even if the same law is violated again, only up to an additional 20% penalty surcharge can be imposed. The Korea Fair Trade Commission (FTC) will revise this so that even a single repeat violation will draw up to a 50% increase, and depending on the number of violations, up to 100%. The intent is to align with levels in Japan and the European Union (EU).
It will also raise the severity criteria for violations, which serve as the starting point for calculating penalty surcharges. The view is that even when the scale of harm or illegality is large, the severity assessment can come out low, resulting in insufficient penalty surcharges. The Korea Fair Trade Commission (FTC) plans to adjust the severity criteria to lift the base penalty surcharge level itself.
It will also revise the penalty surcharge ceiling. For major violations such as abuse of market dominance, it will raise the cap on ad valorem penalty surcharges. Under the current Fair Trade Act, the ceiling for penalty surcharges for abuse of market dominance is up to 6% of relevant sales. Japan imposes 10%, and the EU up to 30%. The Korea Fair Trade Commission (FTC) says it will narrow this gap.
It will also raise fixed-amount penalty surcharges applied when it is difficult to calculate relevant sales. It will push in the first half of next year to amend laws to raise the fixed-amount penalty surcharge ceilings across the Fair Trade Act and the so-called "four gap-eul relationship laws," including the Agency Transactions Act and the Franchise Business Act.
The Korea Fair Trade Commission (FTC) will also redesign the penalty surcharge framework itself. Rather than stopping at raising ceilings, it plans to rebuild the system based on whether it can actually deter violations. To that end, after a research project, it will prepare a draft of the reform and continue discussions in a "penalty surcharge system improvement task force (TF)" with experts and stakeholders.
The Korea Fair Trade Commission (FTC) said, "If penalty surcharges based on relevant sales lack deterrent power, we can also consider additional aggravation," and noted, "As in the EU, if needed, we will also look at imposing up to a certain percentage of corporations' total sales."