Critics say Korean FTC is "too lenient"

Korea’s Fair Trade Commission (FTC) is facing increasing criticism from parties who believe it should not be given the exclusive right to decide if companies should face investigation for antitrust activities.

The finger pointing comes after a series of lenient decisions made by the watchdog, the Korea Herald reports.

Currently the FTC holds the exclusive rights to such cases as a means to stop abuse by law enforcement agencies.

However, it is now coming under fire from officials in the Korean legal field who claim that the 32 year old system is waning and needs a refresh. There are also claims that the watchdog
seems more eager to protect companies than victims of unfair trade.

One example given here was when the regulator investigated and found guilty Samsung and LG, which dominate more than 90 percent of the domestic market, for fixing the prices of home appliances between 2008 and 2009.

However, critics claim that the regulator’s leniency program meant that LG was exempted from a fine of $16 million (18.83 billion won), while Samsung got its fine halved.

And in its old age the law is wobbling, with the Korea Herald reporting that up until 2000, the FTC filed a complaint against  two percent of the total cases detected.

However, this figure had dropped to 0.95 percent over the past 10 years even though the annual number of cases the agency handled had increased five- to six-fold during the same period.

It also pointed out that of the 3,505 cases the FTC detected in 2010, the agency filed a complaint in only 19 cases. In 1,763 cases, the agency ended up issuing a warning.

The low amount of fines has also caught the eye of critics, which pointed out that although the FTC usually imposed fines equivalent to around one to two percent of related profits, in other developed countries the rate increased to 15 to 20 percent of profits.

Politicians and civic groups now demand that tougher measures, including criminal charges, be adopted to prevent unfair trade among conglomerates together with abolishing the exclusive right of the FTC.

Compared to other countries, they say, unfair business activities like price fixing are more likely to happen in Korea, where the gap between large and smaller firms is deepening due to the powerful market dominance of major conglomerates.

Rep. Kim Jae-won of the ruling Saenuri Party said: “At a time when ‘economic democratisation’ is emerging as a new agenda, it is inappropriate to maintain the system.”

However, the FTC fought back claiming that antitrust cases should be handled differently from other criminal charges.

It said that that this was because the consequences needed to be considered carefully and added, before pointing out that in many countries, criminal charges were taken as “supplementary measures together with administrative punishment.”

It claimed that of 34 OECD member states, Korea was one of 13 countries that imposed criminal charges, while others such as Australia, the Netherlands, Sweden, Spain and Finland had no regulation for criminal charges.

The FTC said that of the 13 countries that imposed criminal charges, seven countries had no record of punishment over the past 10 years.

The exception fell in the US where the Justice Department oversaw antitrust cases together with fair trade authorities, it added.