This content is from: Local Insights

South Korea

The Korea Fair Trade Commission (KFTC), has recently announced several new policy initiatives.

Merger control regime

First, the Commission is considering the adoption of new guidelines under which merger transactions occurring outside Korea may have to be reported to it if such transactions meet certain merger control requirements. While the Korean Monopoly Regulation and Fair Trade Act does not specifically exclude the acquisition of shares, or of business transfers occurring outside Korea from the legal obligation of notification or filing under the Act, the Commission has not strictly enforced the filing requirements for such offshore transactions. In fact, the Commission's internal policy has been not to require reporting if the shares or assets of a Korean company are not being directly acquired by the purchaser. However, the Commission has recently affirmed the necessity of reviewing these offshore merger transactions to determine whether they may have an anti-competitive effect on the relevant Korean market. In this connection, the Commission is understood to be working to amend the Act and the Enforcement Decree promulgated under it. The Commission is considering using a local nexus test (that is, a certain threshold amount of turnover in Korea), to require the reporting of these offshore merger transactions to the Commission. The Commission's annual plan for 2003 shows that it expects to adopt guidelines for reviewing combinations or acquisitions between overseas companies this year.

International cartels

The Korea Fair Trade Commission has also recently changed its position regarding enforcement of the Monopoly Regulation and Fair Trade Act with respect to international cartels. In the past, the Commission's position was that it would not enforce the Act for cartels outside Korea or for unfair trade practices by foreign enterprises. However, the Commission's new position is that it will enforce the Act against foreign cartels to the extent that such cartels have an anti-competitive effect on the Korean market.

On May 20 2002, the Commission imposed a fine amounting to approximately $8.6 million on an international cartel, consisting of six graphite-electrode manufacturing companies from the US, Germany and Japan, for their unfair collaborative acts under the Act. This was the first time that the Commission imposed a fine under the Act on an international cartel of offshore companies for unfair collaborative activities. In doing so, the Commission gave notice that these activities, even by offshore companies, would be subject to the its review under the Act if they have any anti-competitive effect on the Korean market. The maximum penalty for the violation of the Act in Korea is 5% of the total turnover of the products or services of each corporation involved in anti-competitive activities during the violation period.

Others

The Korea Fair Trade Commission has also adopted the Guidelines on the Review of Unfair Collaborative Activities. These guidelines prohibit collaboration by companies on research or marketing unless the companies involved in such activities can prove that the efficiency caused by the activities outweighs any anti-competitive effects.

Additionally, the Commission enacted the Fair Trade in Franchise Transaction Act (effective from November 1 2002), as a basic law for regulating various unfair activities of franchise businesses.

Finally, a hearing on the draft Guidelines for Consumer Protection in Telemarketing prepared by the Commission which are to be promulgated pursuant to the Consumer Protection in Telemarketing Act was held on February 18 2003. The draft Guidelines are expected to become effective in the first half of this year.

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