By Yi So-Yeon, Lee International
A proposed amendment of the Enforcement Decree of the Monopoly Regulation and Fair Trade Act (Fair Trade Act) was approved by the State Council on September 26, 2017. It became effective on October 19, 2017.
The main elements of this amendment are: 1) it imposes new significant charges on companies that fail to file reports required under the law; 2) it changes the requirement for foreign companies to report business mergers; 3) it increases the maximum amount of fines imposed on habitual violators of the Fair Trade Act; 4) it provides for the payment of rewards to people who report illegal activities of Korean conglomerates; and 5) it strengthens provisions protecting technologies and preventing larger companies illegally from luring away employees from small and medium-size companies. Below are some of the details of the amendment.
First, new procedures have been established to compel companies to submit materials to the Korea Fair Trade Commission (“KFTC”) for examination under the revised Enforcement Decree. This revision was made, following an amendment of the Fair Trade Act, to add further punishment for failing to submit a required report. The former Fair Trade Act imposed a fine for non-compliance with the reporting requirement (Article 69-2(6)). The revised act adds more teeth. In addition to a fine and imprisonment (Article 67(9), Article 50-4), it now charges a non-compliant company a daily amount not to exceed 3/1,000 of the company’s daily average sales (as such sales are defined under the Presidential Decree). The Enforcement Decree also has been revised to specify the period during which the charges will be imposed, as well as the amounts to be paid and when the charges will be owed:
The revised Enforcement Decree also raised the level of sales needed to trigger a company’s reporting obligations for a business merger. That revision was made because the assets of domestic companies and size of their sales have significantly expanded along with Korea’s economic growth. Under Article 18(1)-(2), the total assets or sales of a Korean company needed to trigger a report of a business merger increased from W200 billion to W300 billion for a company acquiring another company, and from W20 billion to W30 billion for the company being acquired. Under Article 18(3), the level of domestic sales of foreign companies that trigger merger reporting requirements was also raised to W30 billion. In other words, such foreign companies will be required to report business mergers when their sales in Korea are more than W30 billion, as long as they meet all of the other reporting requirements contained in Article 18(1)-(2).
The revised Enforcement Decree also has increased the sanctions that will be imposed on repeat violators of the Fair Trade Act under Schedule 2(2)(b), raising by 100 percent the maximum amount of fines that can be assessed against repeat offenders. The revised Enforcement Decree also strengthened provisions protecting small and medium-size companies from theft of technologies and luring away of employees by larger competitors.
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