17 June, 2012
On June 12, 2012, the Korean cabinet formally adopted proposed amendments to the enforcement decree of the Korean antitrust statute (the “Amendments”). The Amendments were proposed by the Korea Fair Trade Commission (the “KFTC”) on March 14, 2012. The Amendments include, inter alia, (a) changes to the leniency program, (b) increase in fines imposed for violations of merger control regulations, and (c) adjustment in interest rates that apply to payments and refunds for fines. The Amendments are expected to be signed into law by President Lee within the next few days and to enter into effect on June 22, 2012.
1. Overview of the Amendments
a. Changes to the Leniency Program
The Amendments provide for two changes to the existing leniency program. The first change concerns leniency eligibility for a two-party cartel. Under the current Korean antitrust law, a member of a cartel is eligible for (i) a complete exemption from fines if it is the first to file a leniency application for that particular cartel, and (ii) a 50%
reduction in fines if it is the second to do so, irrespective of the number of participants in the cartel. Under the Amendments, where a party to a two-party cartel has already filed for leniency, the other party is not eligible for any reduction in fines.
The second change to the leniency program is a limitations period for a second leniency application concerning a particular cartel. Under the current Korean antitrust law, a member of a cartel may file for leniency at any time during the KFTC’s investigation into that cartel. Under the Amendments, once a member of a cartel files the first leniency application for that cartel, the other members have only two (2) years in which to file the second leniency application.
b. Increase in Administrative Fines Imposed for Violations of Merger Control Regulations
Under the Korean antitrust statute, failure to report a transaction to the KFTC is subject to a maximum fine of KRW 100 million (approx. USD 90,000) if a merger notification for that transaction is required under the Korean merger control regulations. In practice, fines imposed for failure to report a transaction to the KFTC have been significantly below the statutory ceiling. To deter violations of the Korean merger control regulations, the Amendments (i) raise the minimum fines for such violations, and (ii) allow for maximum fines of up to 150% of the statutory ceiling in case of delayed reporting. For violations of the post-closing reporting requirement, however, the Amendments do not raise the statutory ceiling.
| Category | Minimum Fines | Minimum Fines | Note |
| Current | Amendments | ||
|
Violation of Pre-closing
Reporting Requirement
|
KRW 7,500,000 –
KRW 20,000,000
|
KRW 15,000,000 –
KRW 40,000,00
|
Doubled |
|
Violation of Post-closing
Reporting Requirement
|
KRW 1,000,000 –
KRW 3,000,000
|
KRW 4,000,000 –
KRW 12,000,000
|
Quadrupled |
c. Adjustment in Interest Rates That Apply to Payments and Refunds for Fines
Currently, interest rates that apply to overdue payments for fines and to refunds for fines (in case of court decisions overturning fines, for instance) are published by a notice issued by the KFTC. As such, they are not set by the enforcement decree or the antitrust statute. The Amendments adjust these interest rates to reflect prevailing market rates and incorporate them into the Enforcement Decree itself for greater procedural transparency
| Type of Interest Rate | Current | Amendments |
| Overdue Payments for Fines |
Approx. 10.59% per annum
(Notification)
|
8.5% per annum
(Enforcement Decree)
|
| Refunds for Fines |
5.52% per annum
(Notification)
|
4.2% per annum
(Enforcement Decree)
|
2. Implications of the Amendments
Whereas the Amendments as a whole have significant implications, the impending changes to the leniency program are particularly noteworthy because they reflect a shift in cartel enforcement policy. In recent years, the KFTC has heavily relied on the leniency program to regulate cartels. A by-product of this regulatory development has been a proliferation of leniency filings by “second” applicants. In the KFTC’s view, a number of these “second” applicants exploited the leniency program by obtaining a 50% reduction for fines where (i) their cooperation with the KFTC did not contribute to the public good, as in case of a two-party cartel, or (ii) they deliberately delayed filing for leniency. In retrospect, the Amendments suggest, these applicants should not have been eligible for leniency.Should you have any questions on the Amendments, please feel free to contact the professionals listed below.
For further information, please contact:
Hae Sik Park, Partner, Yulchon
Seuk Joon Lee, Partner, Yulchon
Sung Bom Park, Partner, Yulchon
Kum Ju Son, Partner, Yulchon
Kyoung Yeon Kim, Partner, Yulchon
Cecil Saehoon Chung, Yulchon