The Korea Fair Trade Commission said on the 30th that it will not punish as collusion cases in which small business owners and small and medium-sized enterprises form groups to share in advance transaction terms such as supply prices to large corporations and agree to align them at a certain level. As a result, small business owners and small and medium-sized enterprises will be able to engage in collective bargaining against large corporations, similar to labor unions. Following the yellow envelope law, a new labor law aimed at strengthening the bargaining rights of subcontract workers, concerns are growing that large corporations' bargaining burden will increase. However, bid-rigging will continue to be subject to punishment.
On this day, Chairperson Ju Biung-ghi of the Korea Fair Trade Commission (FTC) announced a "plan to overhaul the system to strengthen the bargaining power of those in the weaker position" at a Cabinet meeting at the presidential office. Ju said, "We will fully allow small and medium-sized enterprises and small business owners, in the process of negotiating with large corporations and mid-sized corporations, to agree on or exchange information on price, transaction terms, transaction volume, and transaction regions."
◇ Small business owners and SMEs can engage in collective bargaining with large and mid-sized corporations
Currently, Article 40 of the Monopoly Regulation and Fair Trade Act prohibits unfair concerted acts, and Article 51 prohibits collusion by business associations. In addition, Article 11 of the Small and Medium Enterprise Cooperatives Act states that unfair concerted acts by cooperatives may be punished if they infringe on consumer interests. Under current law, small business owners are classified as independent businesses. Therefore, if they jointly demand supply prices or transaction terms against large corporations, the Korea Fair Trade Commission (FTC) can punish them for collusion.
The Korea Fair Trade Commission (FTC) decided to amend the Monopoly Regulation and Fair Trade Act and the Small and Medium Enterprise Cooperatives Act so that when small business owners and small corporations engage in collective bargaining against large corporations and mid-sized corporations and simply notify the FTC, it will not be deemed collusion. Small corporations are defined under the Framework Act on Small and Medium Enterprises as corporations with annual sales by industry between 1.5 billion won and 14 billion won and total asset under 500 billion won. The exception to the application of collusion will be effective for five years from the date of notification. However, if consumer prices surge after collective bargaining and consumer interests are significantly harmed, a prohibition order will be issued.
The Korea Fair Trade Commission (FTC) will tighten the requirements and procedures for exceptions to the application of collusion when mid-sized corporations with sales exceeding 14 billion won form groups to negotiate. For example, the negotiating counterpart is limited to large corporations and large mid-sized corporations with total asset of 500 billion won or more. In addition, the group's combined annual sales must be smaller than that of the counterpart, and each business's dependency on transactions with the counterpart must be 30% or more. In such cases, if an application for an exception to collusion is filed with the FTC, the FTC will accept it after confirming whether the formal requirements are met. The exception to the application of collusion will be effective for three years.
Even in such cases, if consumer prices surge or concerns about monopoly or oligopoly grow after the exception is applied, the Korea Fair Trade Commission (FTC) may issue a prohibition order.
However, bid-rigging will continue to be punished. The Korea Fair Trade Commission (FTC) said, "Bid prices and successful bidders are determined through bidding procedures, not negotiations, so it is difficult to see them as acts necessary for negotiation." It added, "However, we plan to strengthen lower-level regulations so that large corporations and others do not abuse bidding procedures to circumvent this system."