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[SOUTH KOREA] KFTC Announces Its Enforcement Plan Detailing Its Focus Areas for 2017

May 2017 - EU & Competition. Legal Developments by Kim & Chang .

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On January 5, 2017, the Korea Fair Trade Commission ("KFTC") announced its enforcement plan for 2017 (the "Plan"), and set out detailed policies to: (i) monitor and remedy anti-competitive structure and behavior; (ii) establish a healthy business system among large conglomerates and small and medium-sized enterprises (“SMEs”); and (iii) build a consumer-friendly environment promoting consumers’ rights.  

Details:  

1. Promote Competition on Innovation in Knowledge-based Industries  

The KFTC plans to focus their investigative authority on the exclusionary conducts and behaviors that restrain competition on R&D and innovation in industries where standard technologies are widely used (e.g., semiconductor, telecommunications and media industries).  

Additionally, in the pharmaceutical industry, the KFTC plans to investigate reverse payments, which limit the release of generic drugs, and therefore increase drug prices. The KFTC will also monitor drugs subject to patent lawsuits in Korea and in other countries, as well as drugs subject to sales prohibition under the Pharmaceutical Affairs Law  

Further, the KFTC plans to investigate unfair trade practices by mobile device manufacturers, which have superior bargaining positions and abuse such positions to the distributors’ disadvantage.  

2. Prevent Formation of Monopolistic/Oligopolistic Markets  

The KFTC plans to aggressively regulate M&A deals that are expected to have substantial effect on the Korean market and those that may establish or strengthen monopoly or oligopoly. Specifically, the KFTC will actively respond to global M&A by strengthening coordination with other competition agencies.  

Further, through pre-monitoring and preliminary review, the KFTC plans to promptly review M&A deals that involve restructuring and business reorganization, and may have substantial social impact.  

Through specific analysis, the KFTC plans to prepare measures to promote competition in markets, where monopolistic or oligopolistic conditions and their harmful effects have lasted for a long time (e.g., railways, mobile communication, and movie markets).  

Additionally, the KFTC plans to improve competition-restraining conditions in public procurement bidding regulations, entry barrier regulations in the leisure industry, and regulations that restrict business territories.

3. Closely Monitor Cartels and Unfair Trade Practices  

The KFTC plans to focus its enforcement action on the eradication of cartels in those sectors that directly affect people’s daily lives, such as medical services. Further, the KFTC plans to aggressively investigate international cartels in industries where there is a heavy reliance on foreign businesses, or those closely related to export/import, such as electronic parts, auto parts, and transportation services.  

Moreover, the KFTC plans to enhance the deterrent effect of enforcement actions by strengthening post-monitoring of compliance with corrective measures, improving systems that incentivize cartels, and supporting private claims for damages. When reviewing cases to support future private lawsuits for damages, the KFTC plans to collect price information before and after the collusion. Through its press releases, the KFTC plans to actively promote the possibility of private actions.

Finally, the KFTC will closely monitor unfair trade practices in sectors that are significantly harmed by unfair trade practices, such as restriction of online sales, interference with direct overseas purchase or parallel imports, and restraint on competition in the pets sector.

4. Improve Unfair Subcontracting Trade Practices between Large Conglomerates and SMEs  

The KFTC plans to closely check the three major unfair subcontracting trade practices (i.e., unfair determination/reduction of price, unfair cancellation, and unfair return) in the machinery, electronics, and pharmaceutical manufacturing industries. Moreover, to systematically monitor and remedy unfair subcontracting trade practices in the process of commissioning and distributing software development, the KFTC will check the software developers’ practice of not providing written contracts or orders in the first half of the year.  

In the second half of the year, the KFTC will conduct on-site inspections on the common difficulties faced by small and medium software developers, such as unfair special terms in contracts and nonpayment of delay interest or fees for using payment methods other than promissory notes.  

5. Prevent and Proactively Respond to Heighten Consumer Protection  

The KFTC plans to strengthen regulations on products that may harm consumers by aggressively monitoring unfair advertisements on the safety of the products closely related to the daily lives of people (e.g., consumer chemical products and children's products). Also, the KFTC plans to introduce punitive damages to product liability cases to enhance damages, and impose treble damages to companies that intentionally cause serious harm to consumer’s life or body. To reduce the burden of proof for plaintiffs for product defect cases, the KFTC plans to amend the Product Liability Act.  

6. Strengthen Consumer Protection in ICT Technology-Based Transactions  

To strengthen consumer protection, the KFTC plans to conduct market survey of digital contents, mobile reservation services, random products, and mobile, Internet, and other ICT technology companies.  

7. Focus on Unfair Standardized Contracts in Platform Businesses and Sharing Services 

The KFTC plans to check online platform services and their terms of use in shopping, real estate, delivery, lodging, and dating industries. Specifically, the KFTC will focus on whether the terms of use include waiver of liability for the business, lowest price guarantee, and discretionary use of the information on the listed property.