The Korea Fair Trade Commission is pushing to significantly toughen monetary sanctions imposed on corporations that do not comply with investigations. It plans to newly introduce a penalty surcharge for refusing investigations and greatly raise the cap on compliance fines to secure the effectiveness of investigations.
Ju Biung-ghi, Chairperson of the Korea Fair Trade Commission (FTC), reported to President Lee Jae-myung at a Cabinet meeting at the Blue House on the 27th that "we will strengthen our investigative powers by creating new economic sanctions such as a penalty surcharge for acts of noncompliance with FTC investigations."
The Korea Fair Trade Commission (FTC) is reviewing a plan to impose a penalty surcharge of up to 1% of the previous fiscal year's annual sales for acts of refusing or obstructing investigations, and to impose a compliance fine of up to 5% of the previous fiscal year's average daily sales if an investigation order is not carried out. The plan also includes revising the system to allow simultaneous imposition of both the penalty surcharge and the compliance fine.
Currently, the Monopoly Regulation and Fair Trade Act imposes criminal penalties for obstructing or refusing FTC investigations through violence, verbal abuse, or hiding or destroying materials, and allows the imposition of compliance fines for failure to submit materials. However, the cap on compliance fines is limited to 0.3% of average daily sales or 2 million won, leading to criticism that effectiveness is low. If the new plan is implemented, the cap on compliance fines will rise to about 16.7 times the current level.
To establish a legal basis for strengthening investigative powers, the Korea Fair Trade Commission (FTC) will work with the National Assembly so that related amendment bills can be introduced in the first half, and it also plans to finalize and announce a reform plan for the penalty surcharge system within the year.
Along with this, a plan to raise the level of sanctions for abuses of market power by market-dominant business operators was also reported. The plan would raise the cap on the ad valorem penalty surcharge, currently set at 6% of sales, to 20%, and increase the cap on the fixed-amount penalty surcharge from the current 2 billion won to 10 billion won. It also includes a plan to increase penalty surcharges by up to 100% depending on the number of violations for business operators that repeatedly break the law.
In response, President Lee Jae-myung said, "What's the point of setting it at 20%? People will work it so it ends up at 2%," noting that simply raising the cap may not guarantee the effectiveness of sanctions. He added, "When there is a violation, the default should be that amount, and there should be a system to reduce it when there is a reason."
The Chairperson said, "Currently, ad valorem penalty surcharges are often calculated at around 3%," and added, "Along with legal revisions, we are also reviewing a plan to raise the starting point for imposing penalty surcharges through amendments to the notice."