Recently, large corporations such as Hanwha and Coupang have challenged the Korea Fair Trade Commission (FTC)'s on-site investigation methods and are willing to go to court. Until now, corporations tended not to respond hard-line even when they faced excessive demands during the Korea Fair Trade Commission (FTC)'s on-site investigations. They considered that falling out of favor with the "economic prosecutors" and "grim reaper of the business world" could lead to expanded probes, massive penalty surcharges, and criminal complaints.
The shift in how corporations respond has come as the Korea Fair Trade Commission (FTC) is conducting all-around investigations under the current administration. Corporations appear to judge that unless they actively exercise their right to defense guaranteed by law, they risk indiscriminate investigations and severe sanctions.
In legal circles, some said, "The Korea Fair Trade Commission (FTC)'s on-site investigations are similar to search-and-seizure by investigative authorities, but they proceed without a warrant, and cases that place an excessive burden on corporations and executives and employees have not disappeared."
◇ Hanwha wins suspension of effect of data submission order… Coupang refuses on-site investigation
The Seoul High Court on the 9th accepted Hanwha's request to suspend the effect of the data submission order issued by the Korea Fair Trade Commission (FTC). Accordingly, the data submission order the Korea Fair Trade Commission (FTC) issued to Hanwha is suspended until Jan. 31 next year. This is the first time a court has suspended the effect of a Korea Fair Trade Commission (FTC) data submission order.
Hanwha has argued that during the Korea Fair Trade Commission (FTC)'s on-site investigation in June–July into alleged unfair collection of trademark royalties from affiliates, viewing employee A's mobile phone text messages and demanding related data was unlawful. Accordingly, along with the main suit seeking to "cancel the data submission order," it filed for a suspension of the order's effect.
Earlier, in the previous month, Coupang refused an on-site investigation into alleged violations of the Large-scale Distribution Business Act by the Korea Fair Trade Commission (FTC), and filed a lawsuit with the Seoul High Court to cancel the on-site investigation decision and disposition. Coupang argues it was unlawful because there was no prior notice seven days before the on-site investigation as required by Article 17 of the Framework Act on Administrative Investigations. The Korea Fair Trade Commission (FTC), however, says the Monopoly Regulation and Fair Trade Act, which the Large-scale Distribution Business Act applies mutatis mutandis, does not require seven days' prior notice.
Since the Korea Fair Trade Commission (FTC) was launched, Coupang and Hanwha are the first to file lawsuits claiming problems with the on-site investigation methods. A fair trade attorney at a major domestic law firm said, "Although corporations have long felt uncomfortable with the Korea Fair Trade Commission (FTC)'s investigative practices, they kept quiet because the commission's authority is so powerful." The attorney added, "But legal awareness among corporations and employees has risen, and there also seems to be a sense of crisis that tolerating unreasonable treatment could lead to even harsher investigations or sanctions."
◇ "Korea Fair Trade Commission (FTC) on-site probes proceed more broadly than search-and-seizure, even without warrants"
The backdrop to corporations taking legal action against the Korea Fair Trade Commission (FTC)'s on-site investigations is that these administrative-form investigations are conducted more broadly than search-and-seizure by investigative authorities.
For investigative authorities, search-and-seizure warrants are issued by a court only when the targets and locations are clearly specified, and at trial, only materials secured under the warrant are admitted as evidence.
By contrast, the Korea Fair Trade Commission (FTC)'s on-site investigations can proceed even if the targets are not clearly specified. During on-site probes, Korea Fair Trade Commission (FTC) staff have often demanded to see, all at once, the work PCs or personal mobile phones of employees whose connection to those surveyed is unclear, leading to clashes when employees and legal representatives refuse.
In this context, there is analysis that Coupang's refusal of the on-site investigation on procedural grounds has influenced other corporations. In other words, a "Coupang butterfly effect" has appeared.
A fair-trade attorney who formerly worked at the Korea Fair Trade Commission (FTC) said, "When Coupang challenged the Korea Fair Trade Commission (FTC)'s investigative practices and filed suit, other corporations also felt, 'There's no reason we can't assert our legal rights,' and that sentiment spread."