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FTC of Korea to Revise Fair Trade Act with Focus on 4.0 Industry Era
Against New-type Unfair Trades
FTC of Korea to Revise Fair Trade Act with Focus on 4.0 Industry Era
  • By Michael Herh
  • March 20, 2018, 00:00
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The Fair Trade Commission (FTC) will prepare legal grounds to prevent new types of unfair trading practices that are occurred by rapidly changing industrial structure.
The Fair Trade Commission (FTC) will prepare legal grounds to prevent new types of unfair trading practices that are occurred by rapidly changing industrial structure.

 

The Fair Trade Commission (FTC) will totally revises the Fair Trade Act enacted in the industrialization era of the 1980s. This is because the commission judged that in the era of the 4th industrial revolution, the current competition law system would not be able to establish and nurture future new industries in complex issues such as so-called "algorithm fixing" or mergers between big data corporations.

Kim Sang-jo, chairman of the Fair Trade Commission, announced the basic direction of a new fair trade act for the era of the 4th industrial revolution in a briefing on the launch of the "Special Committee for Reorganization of the Fair Trade Act" at the Sejong Government Complex in downtown Seoul on March 19.

"The current regulation on the abuse of the status of market-dominant business operators in the Fair Trade Act has become a nearly mere scrap of paper," chairman Kim explained. "We have set up a special committee to apply the changed economic environment and improve the consistency and completeness of the law." The Fair Trade Act, which was enacted in 1980, has been revised 27 times since then, so there are many overlapping provisions and many cases in which judgments varied, depending on who interpreted the act.

In fact, a provision on inhibiting the abuse of the status of market-dominant business operators cannot cover all violations occurring these days. The current act cannot cope with algorithm fixing, a representative unfair act committed by price comparison and recommendation services.

In order to improve this, the newly established special committee beefed up their specialties by setting up three sections –- the competition system, the business group act and the procedural act. The 23-member special committee is jointly headed up by professor Yu Jin-soo of Sookmyung Women's University and Ji Chul-ho, vice chairman of the commission.

Most notably the special committee will prepare legal grounds to prevent new types of unfair trading practices that are occurred by rapidly changing industrial structure, including algorithms and collusion and data monopoly. Algorithms and collusion refers to anti-competitive behavior that competitors can achieve and sustain collusion without any formal agreement by using similar pricing algorithms. For instance, Uber, the world's largest taxi company, allows to change prices according to demand by using algorithms. The United States District Court for New York ruled that there was a silent collusion between Uber drivers due to this algorithm policy. Under the current law, it is hard to regulate collusion. Therefore, it needs improvement, according to the FTC.

In particular, the FTC has decided to reorganize a legal system to regulate information and communications (IT) platform operators, such as Naver and Google. It will also reorganize a committee to secure specialty and independence.

The FTC will also revise a corporate combination report system in order to prevent data monopoly by IT platform operators. Under the current law, companies which have assets or sales of more than 300 billion won (US$279.33 million) are required to report to the FTC when they merge and acquire companies with assets or sales of over 30 billion won (US$27.93 million). Accordingly, some pointed out that big data firms that have a small amount of sales but have a great corporate value can take advantage of loopholes in a law. The FTC will add new standards, such as the amount of transactions as well as sales, to plug up a legal loophole.

In this regard, an official from the IT industry said, “The chance is great that most algorithms that allow consumers to look for prices they want are similar, and most platform operators mediate sellers’ pricing policy. So, it may be asked whether the term “algorithm and collusion” itself is valid. The industrial landscape rapidly changes in a year. It is difficult to understand how the FTC will embrace all within the legal and institutional limits.”

The special committee held its first meeting on March 16, and gathered the opinions of the FTC, external experts, and stakeholders to confirm 17 issues such as the abuse of market-dominant positions and fixing permit systems.

First, the Competition Legislation Division selected modernizing regulations on the abuse of market-dominant positions and improving leniency and fixing permit systems as its main tasks. The Corporate Group Legislation Division is focusing on a restructuring of the business group designation system and regulations on frauds and unfair support acts. The Procedural Legilation Division discusses how to ensure defendants’ rights and enhance the effectiveness of agreements. These divisions have experts in competition law, commercial law, economics, and business administration (corporate governance), judges, prosecutors and lawyers.

The special committee is planning to discuss issues at weekly or biweekly meetings for five months until July and submit an amendment to the FTC by preparing alternative plans. The FTC is expected to finalize the amendment to the law at a regular session of the National Assembly in the second half of this year under in the form of government-led legislation after consultations with ministries based on the amendment.