Regulations on Dominant Firms Likely to Be Toughened

The regulations on dominant companies are highly likely to be toughened to keep the power of large business conglomerates in check.

The Fair Trade Commission (FTC) is pushing to revise the Monopoly Regulation and Fair Trade Act (MRFTA) for the first time in 40 years. A special committee on MRFTA revision is set to hold two public hearings, one at the end of this month and another at early next month, to announce the outlines of an amendment.

At the center of attention is how to define market dominance. Under the current law, a company whose market share exceeds 50 percent is considered to be in a dominant position.

Seoul National University Professor Lee Bong-ui, a member of the special committee, proposes that a company with over 40 percent of market share and two or three companies with a combined market share of more than 60 percent be considered to be in a dominant position.

In addition, the committee members also suggest that the activities of dominant companies subject to regulations will be expanded. Currently, a dominant company is punished when it determines the price of its product or service unfairly. The committee proposes that a dominant company be banned from unfairly controlling the sales of its product or service.

The committee is also likely to change the criteria for designating large business groups. Currently, the FTC designates an enterprise with more than 10 trillion won (US$9.1 billion) of assets as a “large business group” and an enterprise with assets between 5 trillion won (US$4.55 billion) to 10 trillion won as a “semi-large business group." These business groups are subject to a set of restrictions, including the ban on circular shareholdings and sweetheart deals among subsidiaries. Kyungpook University Professor Shin Young-soo, another member of the special committee, said, “The designation needs to be based on the share of an enterprise’s assets in Korea’s gross domestic product. For instance, we can designate an enterprise a large business group when its share of GDP exceeds 0.5 percent. However, we need to discuss more on what percentage of GDP will trigger the designation.”