[Editorial] Korea Fair Trade Commission seeks to seize even the power of life and death over businesses

Following the Fair Trade Commission and the Democratic Party of Korea’s move in April to strengthen economic sanctions, including raising the minimum fine for violations by up to 20 times, they are now pushing for a legislative amendment that would allow for market exit. The proposal would enable business suspension or license revocation if collusion is detected just twice within five years. While justified under the pretext of strengthening deterrence against collusion, concerns over excessive administrative intervention and the destruction of the market ecosystem cannot be dismissed.

The 17 industries subject to the market exit clause, including transportation and petroleum, are highly sensitive to fluctuations in raw material prices. Price changes due to cost variations are frequent, making it sometimes difficult to distinguish between legitimate price-setting and collusion. Uniform exit criteria that do not consider industry-specific characteristics could stifle business activities.

The joint announcement by the party and the government also includes a provision allowing the Korea Fair Trade Commission to issue "price reset orders" to restore prices to pre-collusion levels. Despite recent court rulings repeatedly blocking price reset orders in cases involving printing paper and flour collusion, the decision to codify this in law reflects an intent to expand administrative intervention into market pricing.

Concerns are also raised over provisions that would render the leniency program for voluntary self-reporting ineffective. The party and government have decided to maintain fine reduction benefits for voluntary reporters while abolishing reductions on corrective measures. This could reduce incentives for companies to voluntarily report collusion, making it more difficult to detect covert collusive practices.

Currently, there are already criticisms that the Korea Fair Trade Commission’s excessive actions lead to increased legal risks and costs for businesses, while only inflating the market value of former commission officials. The fines imposed by the Korea Fair Trade Commission from January to July this year totaled 1.3528 trillion won, four times the annual total of 340.2 billion won last year. Most of these cases are likely to result in appeals. As a result of law firms’ efforts to recruit former officials, compensation for those with Korea Fair Trade Commission backgrounds at Kim & Chang has soared to an average monthly salary of 30.59 million won.

Of course, sanctions commensurate with the degree of consumer harm and market distortion caused by collusion are necessary. However, simply increasing the severity of sanctions does not restore market order. Above all, government actions must not lead to outcomes that undermine the foundation of market competition.

In industries where new entry is difficult, if companies are forced out of the market, the monopoly power of the few remaining firms becomes entrenched. This leads to price increases and restrictions on consumer choice. One-sided regulatory administration must be halted. A policy shift is needed to allow businesses to grow based on competition.