CONTENTS
- 1. Violation of the Monopoly Regulation and Fair Trade Act | Concept Explanation
- - Why Enterprises Must Understand and Comply with the Monopoly Regulation and Fair Trade Act
- 2. Violation of the Monopoly Regulation and Fair Trade Act | Principal Types of Violations
- - Abuse of Market-Dominant Position
- - Improper Concerted Practices
- - Unfair Trade Practices
- - Improper Business Combinations
- - Improper Labeling and Advertising Practices
- 3. Violation of the Monopoly Regulation and Fair Trade Act | Corporate Prevention and Response Strategies
- - Self-Diagnosis Checklist for Violations of the Monopoly Regulation and Fair Trade Act
1. Violation of the Monopoly Regulation and Fair Trade Act | Concept Explanation
Violations of the Monopoly Regulation and Fair Trade Act are strictly prohibited because they can pose a threat to the market economy as a whole and may significantly harm consumers' interests.
The Fair Trade Act is the abbreviated name for the Monopoly Regulation and Fair Trade Act, a statute enacted to prohibit improper concerted acts and unfair trade practices.
A violation of the Monopoly Regulation and Fair Trade Act refers to an act by which a business distorts or restricts a free and fair competitive order and thereby causes disadvantage to competitors, consumers, or the market as a whole.
This is regarded not merely as a simple unlawful act but as a serious act that destroys a sound competitive environment across the market and, in the long term, undermines the innovativeness of industry and even consumer welfare.
A violation of the Monopoly Regulation and Fair Trade Act entails a complex set of legal sanctions, including penalty surcharges, criminal punishment, civil damages, corrective orders, and restrictions on participation in bidding; in particular, for companies in public procurement, it may directly lead to a decline in credit standing or the revocation of certifications.
Violations of the Monopoly Regulation and Fair Trade Act are a risk that may confront businesses of all sizes, not only large corporations but also small and medium-sized enterprises, startups, and platform operators.
In particular, intentional or unintentional violations frequently occur in B2B negotiation structures, bidding, supply, advertising and marketing, mergers and acquisitions, distribution, and the like.
It is essential for businesses to check in advance whether they are in violation of the Fair Trade Act and to establish a compliance monitoring system.
Why Enterprises Must Understand and Comply with the Monopoly Regulation and Fair Trade Act
The reasons an enterprise must understand and comply with the Monopoly Regulation and Fair Trade Act can be set out item by item as follows.
A violation of the Monopoly Regulation and Fair Trade Act gives rise to severe legal sanctions, including penalty surcharges, criminal punishment, and restrictions on participation in bidding.
In particular, if the violation is reported in the media, it also leads to damage to the corporate image.
2. Participating in Public Procurement and Maintaining Certifications
In order to participate in bidding by the government or public institutions, or to maintain certifications (such as venture certification or technology guarantees), an enterprise must maintain compliance management with no history of legal violations.
3. Securing Trust with Partners and Business Counterparties
By adhering to fair transaction practices, an enterprise can maintain long-term and stable partnerships with partner companies and can also minimize conflicts and disputes arising from unfair transactions.
4. A Key Element of ESG Management and Ethical Management
Fair competition is central to the ‘S’ and ‘G’ elements of ESG (Environmental, Social, and Governance).
Whether an enterprise complies with fair trade serves as an important criterion in ESG evaluations, attracting investment, and supplying to large corporations.
5. Embedding Internal Ethical Awareness and Organizational Culture
The Monopoly Regulation and Fair Trade Act is connected not merely to a legal matter but also to corporate culture.
When a culture forms in which officers and employees voluntarily pursue fair transactions, risk is reduced and productivity improves.
6. Securing a Competitive Market Position
In the long term, transparent and fair competition, rather than unfair competition, provides the foundation for securing stronger brand trust and market competitiveness.
7. Strengthening the Ability to Respond to Investigations by Supervisory Authorities
When faced with an investigation by the Korea Fair Trade Commission, the prosecution, or the like, an enterprise that has established its own fair trade compliance system can respond more effectively to the investigation, and there is a possibility that sanctions may be mitigated.
2. Violation of the Monopoly Regulation and Fair Trade Act | Principal Types of Violations
The conduct constituting a violation of the Monopoly Regulation and Fair Trade Act and the consequences thereof are as follows.
Where a business operator applies discriminatory transaction terms to its counterparties so as to weaken the position of competitors or counterparties and thereby strengthen its own position
Where a business operator, in order to exclude a competitor, sells goods or services at a price significantly below cost
Where a business operator unfairly induces a competitor's customers through means such as providing excessive benefits, obstructing the conclusion of contracts, or inducing breaches of contract
Where a business operator holding a superior bargaining position in a transaction uses that position to impair the decision-making of its counterparty and impose disadvantages in the transaction
In addition, the level of punishment for a violation of the Monopoly Regulation and Fair Trade Act is as follows.
| Conduct | Level of punishment |
| General unfair trade practices | Imprisonment for not more than 2 years or a fine not exceeding KRW 150 million |
| Refusal to deal, discriminatory treatment, exclusion of competitors, violation of binding-condition transactions | Imprisonment for not more than 3 years or a fine not exceeding KRW 200 million |
This is not all: upon a violation of the Monopoly Regulation and Fair Trade Act, a penalty surcharge is imposed within a range not exceeding an amount calculated by multiplying turnover by 4/100. (Where there is no turnover, within a range not exceeding KRW 1 billion.)
We will now examine the principal types of violations of the Monopoly Regulation and Fair Trade Act in detail.
Abuse of Market-Dominant Position
This refers to conduct whereby an enterprise possessing market power goes beyond legitimate competition and dominates the market through means such as obstructing market entry, price discrimination, tie-in sales, and refusals to deal.
For example, if a domestic monopoly software company configures its systems so that other products cannot be used unless its essential program is purchased, this may constitute an abuse of dominant position.
Improper Concerted Practices
This is a representative form of unlawful conduct in which enterprises in the same line of business agree in advance on matters such as prices, bidding, output, and the timing of technology adoption, thereby restricting market competition.
A representative example is bid-rigging, where major construction companies coordinate the bid prices for public projects in advance and thereby nullify competition in the bidding.
This is frequently subject to criminal punishment as well as to claims for damages.
Unfair Trade Practices
This encompasses the full range of conduct that harms a fair transaction order, including the coercive setting of transaction terms, abuse of bargaining position, and the imposition of disadvantages in transactions.
For instance, where a prime contractor unilaterally lowers supply unit prices, or compels supply through an oral contract without a written agreement, this constitutes an unfair transaction.
The Korea Fair Trade Commission has been further strengthening enforcement in this area for the protection of small and medium-sized enterprises.
Improper Business Combinations
Where a merger and acquisition (M&A) between enterprises or the integration of affiliates is likely to substantially restrict competition, approval from the Korea Fair Trade Commission must be obtained.
If a business combination is pursued without authorization, or is carried out in disregard of a likelihood of restricting competition, sanctions such as the invalidation or dissolution of the merger are imposed.
Because this applies not only to large corporations but also to M&A between platform companies, caution is required.
Improper Labeling and Advertising Practices
This includes false or exaggerated advertising, deceptive advertising, and comparative advertising that may mislead consumers.
For example, falsely labeling a product as domestically produced, or product advertising that emphasizes efficacy without substantiating data on its functions, are all subject to punishment.
Recently, undisclosed paid promotions using SNS influencers and advertisements that fail to disclose sponsorship have also been subject to enforcement.
3. Violation of the Monopoly Regulation and Fair Trade Act | Corporate Prevention and Response Strategies
In order for an enterprise to prevent violations of the Monopoly Regulation and Fair Trade Act and respond effectively when violations occur, it is important to implement the following strategies systematically across each area.
1. Establishing an In-House Fair Trade Compliance System
To this end, it should establish a compliance officer or compliance committee reporting directly to the CEO, tasked with monitoring and responding to fair trade risks.
It should embed processes premised on fair trade compliance throughout its business activities, including the conclusion of contracts, the setting of transaction terms, and advertising copy.
In particular, it should establish a system that also reflects the regulations applicable to industry-specific areas such as subcontracting, franchising, agency, and distribution.
2. Employee Training and Fostering an In-House Culture
It is effective to conduct regular fair trade law training for all officers and employees, drawing on content closely related to practice and centered on major legislative amendments and cases of sanctions by the Korea Fair Trade Commission.
In particular, departments with substantial external activities, such as sales, purchasing, and marketing, should cultivate a preventive sensibility through tailored training and practical scenarios.
Providing a standing Q&A board or guidebook on legal matters on the company portal is also a sound approach.
3. Establishing a Process for Prior Consultation and Risk Review
Accordingly, whenever matters arise such as changes to supply contracts following a new product launch, changes of counterparties, demands to reduce supply prices, or requests to share promotional costs, the matter must undergo a prior consultation procedure with the legal team or compliance department.
Furthermore, contracts must include fair trade-related clauses (prohibition of unfair practices, cost-linkage provisions, procedures upon termination, and the like).
4. Establishing a System for Leniency and Whistleblower Response
Because this program offers benefits such as a reduction or exemption of penalty surcharges upon voluntary reporting, it can substantially reduce the sanctions actually imposed.
To this end, it is necessary to set up a channel for receiving whistleblower reports and to prepare a response manual and scenarios covering everything from reporting to investigation when a violation occurs.
5. Securing the Capacity to Respond to External Investigations
It is therefore important to constitute a company-wide response task force in advance, clearly assigning roles to working-level personnel, the legal team, and the public relations team, and to maintain readiness for the preparation of materials and for responding.
It is also necessary to conduct investigation rehearsals or scenario-based response drills on a regular basis, and to carry out advance reviews of key contracts and transaction records in parallel.
6. Self-Inspection and Regular Risk Diagnosis
In particular, subcontracting relationships, unfair labeling and advertising, and abuse of bargaining position in consumer transactions are matters for repeated inspection.
Through collaboration with external specialist fair trade advisory bodies, an enterprise can develop effective inspection results and improvement measures.
7. Monitoring Korea Fair Trade Commission Guidelines and Key Precedents
An enterprise should monitor these regularly, review the content applicable to its own circumstances, and reflect them in in-house policy where necessary.
It should also share information through industry associations and actively participate in matters such as the establishment of industry standard contracts.
8. Fostering a Culture of Mutual Growth with Partner Companies
An enterprise should build a transaction culture grounded in mutual growth—through fair contracts with partner companies, transparency in payment, and the introduction of cost-linkage systems—and should also carry out, in parallel, inspections in preparation for the Korea Fair Trade Commission's win-win growth index and fair trade agreement evaluations.
Self-Diagnosis Checklist for Violations of the Monopoly Regulation and Fair Trade Act
Checklist item | Yes/No |
|---|---|
Have you ever shared price, output, or bidding information with a competitor? |
|
Have you ever forced terms outside the contract on a counterparty or imposed disadvantages on them? |
|
Did you omit a report to the Korea Fair Trade Commission upon an M&A or business combination? |
|
Have you ever run advertising that was exaggerated or potentially misleading regarding similar products? |
|
Is there any indication that you intentionally standardized product prices or attempted collusion? |
|
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