Recent changes to the fair trade compliance program and response strategies

The Fair Trade Compliance Program (CP) refers to an internal compliance system to voluntarily comply with the laws and regulations under the Fair Trade Commission. For the competition authorities, it has the advantage of minimizing administrative costs due to ex post sanctions, and for companies, it not only prevents the burden of investigations and sanctions, but also prevents the corporate image from being tarnished. Above all, if CP is introduced and its operation performance is evaluated as excellent, there is a benefit of receiving a fine reduction of up to 20%.

CP, introduced in 2001, was abolished in 2014 due to criticism that it was being abused for the purpose of reducing fines. However, it became a more effective system by establishing the basis for the incentive to reduce fines in the law in 2023.

Recently, the Fair Trade Commission has issued an administrative notice to revise the CP Notice and is collecting opinions. The main changes include the evaluation stages, additional points, and evaluation procedures.

First, the order of the evaluation stages has been changed. Previous evaluations were conducted in the order of documents, on-site evaluations, and in-depth interviews, but starting this year, face-to-face (interview) evaluations will be conducted after document evaluations. Afterwards, the evaluation process and work will be somewhat simplified as on-site evaluations will be conducted only for companies that have (scheduled to) score 85 or more in the face-to-face evaluation.

In particular, systems excluding rating invalidation, rating withholding, and rating adjustment during the evaluation process will be abolished. Rating withholding refers to a system of withholding ratings when inappropriate reasons arise for assigning a rating due to concerns about compromising the fairness and reliability of the CP system, such as when a case is being submitted for alleged violation of fair trade-related laws. Grade correction is a system where measures are lowered if a violation of the law occurs before or after the grade is assigned. Starting this year, if you are punished for interfering with investigative activities or are evaluated in a false or fraudulent manner, such as by submitting false data, your evaluation will be invalidated.

The most important thing in the CP rating is the CEO's will. Parts where the CEO's will can be quantified include △whether CP is introduced, △appointment of a compliance manager, △dedicated organization and budget support, △education, △prior monitoring and whistle-blowing, △incentives, and △effectiveness evaluation. In particular, it is a good idea to enter the CEO's participation and the number of reports and approvals in most detailed measurement indicators.

Strengthening the capabilities of the CP department is essential. In particular, in the case of additional points, the capabilities of the CP department become important. The evaluation items consist of 48 for large companies and 40 for medium-sized and small-sized companies, but the CP department cannot fill these items through independent efforts. However, since the additional point factors can be achieved through CP's own efforts, strengthening capabilities is essential.

Most companies that received AA to AAA ratings last year are operating as a team directly under the CEO, appointing vice presidents and other relevant leadership positions. In particular, you must pay attention to the introduction and operation of CP by other companies (partners) with the highest score (4 points).

Analysis of best practices is also important. This is because the number of evaluation targets more than doubled last year compared to the year before, making qualitative evaluation through comparison with other corporate cases inevitable. Therefore, it is necessary to persuade internal stakeholders, such as the CEO, by referring to best practices and, if possible, receive assistance from external experts with extensive CP consulting experience.
 

Small Business Team

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Recent changes to the fair trade compliance program and response strategy (link)