"The Standard for Normal Price in Determining Toll Fees for the Owner's Family is the 'Direct Transaction Price'"

Fair Trade Commission Issues Administrative Notice on Revised 'Guidelines for Reviewing Unfair Support Practices'

[Sejong=Asia Economy Reporter Joo Sang-don] The Fair Trade Commission (FTC) has clarified the regulatory basis to control the so-called 'pass-through tax,' one of the unfair support acts benefiting the controlling shareholders. If it is a common practice for the supporting party to directly transact with other businesses excluding the supported party, the direct transaction price of the supporting party will be regarded as the normal price.

On the 13th, the FTC announced that it has prepared a revised draft of the "Guidelines for Reviewing Unfair Support Acts," which serve as the criteria for judging unfair support acts, and will publicly notify it for 21 days until August 3.

An FTC official explained, "The guidelines have not sufficiently reflected the newly established criteria and cases for judging unfair support acts based on recent court rulings and FTC deliberations," adding, "The purpose of updating the guidelines is to ensure consistency and reliability in handling unfair support cases under the Fair Trade Act."

First, the guidelines specify the method for calculating the normal price by type of support act. For an unfair support act to be established under the Fair Trade Act, both ▲the act of support and ▲unfairness conditions must be met. At this time, the 'normal price' is a prerequisite for determining the establishment of the support act. The FTC decided to sequentially apply the normal price (individual normal interest rate) for financial support acts as follows: ▲the interest rate applied between independent parties with no special relationship under the same circumstances, ▲the interest rate applied between independent parties with no special relationship under similar circumstances, and ▲the interest rate applied between independent parties with no special relationship under identical or similar circumstances.

Separate calculation standards were also established for asset, product, and service support acts, which have so far applied the normal price of financial support acts. First, for the relevant asset (such as securities, real estate, intangible property rights), product, or service transactions, the price traded between independent parties with no special relationship in ▲the same case and ▲the price reasonably adjusted for differences in transaction conditions in similar cases will be sequentially applied. If there are no similar cases, the realistic price generally chosen considering the economic and business conditions at the time of the transaction will be identified.

Additionally, when calculating the normal price for support acts involving additional transaction stages, i.e., pass-through tax support acts conducted before the establishment of regulatory provisions for pass-through tax, it is explicitly stated that the direct transaction price of the supporting party can be regarded as the normal price.

The threshold for exemption from the application of unfair support acts was raised from 10 million KRW to 50 million KRW. This adjustment reflects the realistic scope of small-scale businesses whose impact on the market is minimal and for which the need for investigation into unfair support acts is low.

The FTC plans to finalize and implement the revised draft after collecting opinions from stakeholders during the public notification period and going through a plenary meeting resolution.