The Korea Fair Trade Commission said on the 30th that it will strengthen penalty surcharges for illegal acts in subcontracting, franchise, large-scale distribution, and agency transactions.
The Korea Fair Trade Commission (FTC) said it will put up for public notice until June 9 a draft amendment to the enforcement decrees of the Subcontracting, Franchise, and Distribution Acts, centered on raising the base rate for imposing penalty surcharges and the base amount for imposition.
The base rate and the base amount for imposition will also be raised. A Korea Fair Trade Commission (FTC) penalty surcharge is calculated by multiplying the base amount set by each law by the imposition base rate, which takes into account the degree of the violation. When it is difficult to calculate the statutory base amount, a fixed amount is imposed as a penalty surcharge, called the base amount for imposition. In other words, for ad valorem penalty surcharges the imposition base rate will be raised, and for fixed-amount penalty surcharges the base amount for imposition will be raised.
The degree of seriousness, currently set in three levels, will be subdivided into four. Accordingly, for violations of the Fair Transactions in Subcontracting Act, if they are "very serious violations," an ad valorem penalty surcharge with an imposition base rate of 90%–100% or a fixed-amount penalty surcharge of 1.8 billion–2.0 billion won in base amount for imposition will apply. Currently, the ad valorem penalty surcharge is 60%–80%, and 900 million–2.0 billion won.
Also, even with just one violation in the past five years, the penalty surcharge will be increased by up to 50%. If the number of violations is four or more, it will be increased by up to 100%.
Cooperating with the Korea Fair Trade Commission (FTC)'s investigation and deliberation had allowed up to a 20% reduction in the penalty surcharge, but going forward that will be cut to 10%. The reduction rate for voluntary corrective action will also be reduced from up to 50% to within 10%. The Korea Fair Trade Commission (FTC) plans to finalize the overhaul after collecting opinions from stakeholders and relevant ministries during the public notice period and going through review by the Ministry of Government Legislation.