On January 26, 2023, the Korea Fair Trade Commission (the “KFTC”) announced its 2023 Enforcement Plan (the “2023 Plan”).
The 2023 Plan presents the KFTC’s roadmap to achieve its goal for the year under the slogan, “Fair Market Economy with Upright Principles,” and sets out the following as central tasks: (i) create a market environment that promotes innovation through competition, (ii) strengthen the basis to enable fair transactions for small and medium-sized enterprises (“SMEs”) as well as small business owners, (iii) rationalize the operation of the large business group system, (iv) foster a transactional environment that guarantees consumer rights and (v) establish a trusted law enforcement system.
Below we summarize the key points for each of the mentioned tasks.
1. Promote Innovation in Digital Market by Fostering Competition
To address issues related to abuse of dominance and promote structural reform in the digital market sector, the KFTC plans to (i) focus on monitoring abuse of dominance practices that impede innovation through competition in digital economy-based industries (e.g., semiconductors and application markets) and in platform industries (e.g., mobility and open markets), (ii) conduct a balanced review of M&As involving Industry 4.0 (e.g., gaming and cloud industries) while improving the reviewing and reporting standards for M&As among big-tech companies that are likely to expand their market dominance, and (iii) establish an effective regulatory regime against abuse of dominance by big-tech companies.
2. Strengthen Basis for Fair Transaction of SMEs and Small Businesses
To guarantee fair compensation for innovative efforts made by small and medium-sized enterprises and to eradicate unfair practices, the KFTC plans to (i) establish and strictly enforce a “supply price interlocking system” to reflect increases in raw material prices in the unit price of supply, (ii) check for unfair subcontracting practices in the software, content, and advertising industries, (iii) substantially alleviate the pressure on small business owners by reducing the burden on franchisees and prohibiting large retailers from interfering with management, and (iv) actively support self-regulation between platforms (e.g., open markets, delivery apps, lodging apps, and app markets) and vendors.
3. Reasonable Operation of Large Business Group System
It is expected that the KFTC will strictly enforce the law on unfair intragroup transactions such as the illegal succession of control, infringement of SME’s competitive basis, and provision of support for insolvent affiliates. The KFTC also plans to improve the large business group designation system by adjusting the criteria used to designate business groups subject to public disclosure to more reasonable standards or by allowing a foreigner to be designated as a “same person.”
4. Foster Transactional Environment that Guarantees Consumer Rights
With regard to the creation of a digital consumption environment, the KFTC plans to (i) actively prevent consumer deception in the online market by establishing effective regulatory measures against “dark patterns” in large platforms, (ii) prevent consumer harm in transactions between individuals, such as second-hand and resale transactions, and (iii) improve systems to prevent the simultaneous spread of multiple instances of consumer harm.
5. Establish Law Enforcement System That Is Trusted by Public and Market
The KFTC plans to (i) clarify the details and limitations of its investigative authority by drafting on-site investigation notices in detail and establishing procedures that allow the respondents to request the return of data collected beyond the scope of an investigation, and (ii) overhaul the investigation/deliberation systems and establish a case management system by type to improve the law enforcement system (undertaking reorganization to enable such an improvement).
The 2023 Plan highlights key areas of review to enhance innovation in the digital economy at a time when the paradigm shift to a digital economy is accelerating. In addition, the KFTC announced that it will make efforts to strengthen the basis for fair transactions for SMEs and small business owners, as the economic difficulties that businesses and individuals are facing are expected to continue for the time being. Additionally, unfair intragroup transactions are still an important subject of law enforcement in relation to the regulation of large business groups.
In particular, as a basis for its key initiatives, the KFTC expressed its concrete commitment to establish a clear and reasonable law enforcement system that is trusted by the public and the market. The establishment of various procedural devices and systems is expected to improve the procedural rights of respondents as well as make the case handling processes more efficient, swift and transparent.