Response to Fair Trade Investigations

This refers to conduct by which a market-dominant business operator blocks the market entry of competing business operators or restricts consumers' freedom of choice through restraint of transactions, price discrimination, interference with business, and similar means.

Representative examples include a large platform operator's coercion of fee increases, abuse of a superior bargaining position, and restriction of the supply of particular goods.

In responding to an investigation, it is important to carefully prepare arguments that can address the competition-restricting nature of the conduct at issue, the market structure, the dominant operator's market share, and the purpose of any abuse of position.

In particular, a market-dominant position is not in itself unlawful, and it becomes unlawful only where the position is abused, so actively explaining the legitimacy and unavoidability of the conduct is central to the defense strategy.

This is conduct by which competing business operators agree among themselves to determine prices, output, market share, transaction conditions, and similar matters, and it is the most serious violation under the Monopoly Regulation and Fair Trade Act and the one with the highest possibility of criminal punishment.

For collusion, the Korea Fair Trade Commission not only imposes penalty surcharges but also refers cases to the prosecutors' office, and bid rigging in particular is regarded as a matter with significant social repercussions because it arises in bids for construction and services by local governments, public institutions, and similar entities.

In responding to an investigation, the issues are whether there was an agreement constituting collusion, whether the agreement was implemented, and whether substantial evidence of consultation among the business operators exists.

Because the outcome may turn on whether physical evidence such as statements from those involved, emails, messenger communications, and meeting minutes is secured, managing materials and managing the course of the investigation are important during the early response to the investigation.

This refers to conduct by which a large enterprise or a business operator with a superior position imposes contract termination, changes to transaction conditions, unfair shifting of cost burdens, or coerced returns on its counterpart business partner.

Abuse of a superior bargaining position has recently arisen frequently in transactional relationships between platforms, franchises, or large distributors and their supplying companies.

In responding to an investigation, the key point is to address whether abuse of a superior bargaining position actually existed and the resulting transactional disadvantage and degree of harm.

In particular, presenting objective evidence of unfairness in the transactional relationship and legitimate grounds can be effective, and securing prior contracts, records of regular consultations, and response materials prepared when problems arose is necessary as a preventive measure.

Unfair intra-group support is conduct that, in transactions among affiliated companies, concentrates work with a particular affiliate or unfairly supports it, thereby impairing fair competition.

In fair trade investigation response, a strategy of asserting legitimacy on the basis of the absence of unfairness in the support conduct and of managerial necessity and efficiency is used.

In particular, materials such as business strategy documents that can justify support of an affiliate, support contracts, and comparisons of conditions with competing companies should be secured.

In addition, lending of funds, provision of guarantees, provision of low-priced services, and personnel support may be included, and to minimize risk, the management of materials, the organization of positions, and media response should all be prepared simultaneously from the time of the Korea Fair Trade Commission's investigation.

In the case of a violation of the Monopoly Regulation and Fair Trade Act, administrative dispositions and criminal punishment such as the imposition of a penalty surcharge, a corrective order, and a referral to the prosecutors' office may proceed in parallel.

Where the conduct is repeated or the degree of the violation is serious, a fine may also be imposed on the corporation, so the legal and managerial risk to the company can be very large.

To respond to a fair trade investigation, the prompt formation of an investigation response task force and the retention of counsel from the early stage of the investigation are necessary.

At the stage of the Korea Fair Trade Commission's investigation, the scope of the investigation and the issues should be identified, a strategy for the submission of materials should be established, and unfavorable content should be avoided during the statement process.

It is advisable to submit investigation materials by selecting favorable materials, and for unfavorable materials, to review through counsel whether there is an obligation to submit them or grounds for refusing submission.

In preparation for the possibility of a referral to the prosecutors' office after the investigation, establishing a prior settlement, measures for victim relief, cessation of the unlawful conduct, and measures to prevent recurrence, and keeping a record of their implementation, can also serve as mitigating factors.

As a preventive matter, regular training on the Monopoly Regulation and Fair Trade Act, the establishment of an internal compliance system, the operation of an internal reporting system, and the standardization of transaction contracts are necessary.

A fair trade investigation requires an early response and strategic legal advisory.

For prevention, it is important to establish a system that blocks the possibility of violations through regular legal checks and training, contract review, and review of internal policies, and preparing a response system through an experienced attorney and a task force from the point at which an investigation commences can be a reliable way to minimize risk.

If you are in a situation that calls for fair trade investigation response, you may wish to consult a corporate attorney.