The Fair Trade Commission seeks to educate corporations on foreign antitrust prevention
An alarming trend of Korean heavyweight firms paying hefty fines for international price-fixing cartel allegations has come to light. In the past four years, Samsung Electronics, LG Display and Korean Air have all pleaded guilty to cartel charges.
Korean firms alone have paid a total of 1.7 trillion won, or 1.5 billion dollars, in US criminal fines. Of the eight highest criminal fines that the antitrust division of the US Justice Department has ever imposed, four have involved Korean firms.
Moreover, the severity of fines in developed countries has continued to increase. The total figure of such fines in the United States, which neared $150 million in 2000, totaled $6 billion in 2009, and mainly targets Asian and European corporations. Meanwhile, the European Union is also increasing the frequency of fines for similar allegations. During the 1990s, fines for cartel violations totaled ?830 million, but during 2007 alone, the EU imposed fines totaling ?3.3 billion.
A problem with legs
Pleading guilty to international cartel allegations poses a problem since it opens the floodgates for other countries to charge additional fines. For example, in November 2008, LG Display was handed a $400 million fine for the price fixing of its liquid crystal display panels (LCDs) along two other leading Asian flat-screen producers, Sharp of Japan and Chunghwa Picture Tubes of Taiwan. This led to a March 2009 European Union investigation into international cartel activities in the LCD sector, putting LG Display at risk of a further fine yet.
In addition to criminal fines, private class action suits and the detainment of corporate executives have sharply risen in tandem, according to the Korean Fair Trade Commission, with the issue threatening to spread further. Not only are the US and EU cracking down on cartel formation, but developing countries such as BRIC nations have begun monitoring antitrust activities.
Commonly, a cartel violation becomes known when a company which has taken part in price-fixing seeks to elude culpability by notifying relevant authorities. If the company has notified many countries at once in order to escape guilt, then several nations will often begin investigations at the same time.
Because a single admission of guilt can snowball into astronomical penalties paid to various countries in succession - not to mention the danger of additional legal complications such as class action suits and detainment - experts agree on the need for legal screening and accurate assessment of local antitrust laws is applicable to all corporations planning activities in a foreign market.
“Paying fines for international cartel allegations is paramount to putting our consumers’ money in the pockets of overseas consumers. These allegations also harm our national image, and must be stopped at any cost,” said Kim Suk-ho, cartel bureau chief of the Korea Fair Trade Commission.
Authorities take action
Thus, the Fair Trade Commission has set the emphatic goal of rooting out all charges of international price-fixing cartels, and is currently providing numerous education opportunities for at-risk industries regarding international cartel prevention.
Corporate executives of export-heavy industries, such as technology, shipbuilding, textiles, chemicals, steel and mechanical engineering attended extensive educational sessions in March and April, at which experts discussed international regulatory trends, precedents and preventive methods.
Furthermore, overseas Korean firms are being included. 100 employees from 40 Korean firms operating in Europe attended the first international cartel prevention sessions geared toward EU-based businesses in April, and which were held in Frankfurt, Germany. The Fair Trade Commission plans to hold further sessions in international business hubs, such as Beijing, China in July and Los Angeles, US in October.
As South Korea’s export economy becomes the 7th largest in the world, competing nations are keeping an eye on South Korean firms, say experts. More than ever, the localized legal screening of business practices is being called for.