SMEs "Careful Discussion Needed on Enactment of Collective Litigation Act"

Agree with Legislative Intent but Concerned About Excessive Litigation

Headquarters of the Korea Federation of Small and Medium Business

[Asia Economy Reporter Kim Daeseop] The Korea Federation of Small and Medium Business (Kbiz) stated on the 28th in a commentary that "careful discussion is needed regarding the Ministry of Justice's legislative notice today on the enactment of the Collective Litigation Act and the amendment of the Commercial Act to expand the introduction of punitive damages."

The small and medium business sector agreed with the legislative intent. Kbiz said, "It is unforgivable under any circumstances that some domestic and foreign companies have committed antisocial illegal acts in the pursuit of profit, causing irreparable damage to our society and many members of the community," adding, "In particular, thorough prosecution investigations should be conducted regarding the sale of harmful humidifier disinfectants, diesel vehicle emissions manipulation, and poor sales of private equity funds, ensuring criminal punishment for perpetrators and appropriate compensation for victims."

However, concerns were expressed. The small and medium business sector warned, "Even if the legislative intent is good, the enactment of the Collective Litigation Act and the introduction of punitive damages may rather increase legal costs for many honest companies and cause side effects such as unnecessary litigation proliferation."

They also said, "We are especially worried that the significant relaxation of collective litigation requirements and the expansion of punitive damages might open the door to an increase in planned lawsuits aimed at high attorney fees. For companies targeted by planned lawsuits, just being sued can lead to a loss of credibility and a sharp decline in sales, making business activities difficult, and in the case of small and medium enterprises, it could even lead to bankruptcy. Above all, many honest workers would lose their jobs."

The small and medium business sector urged careful consideration regarding the expansion and relaxation of collective litigation requirements. Kbiz explained, "We actively sympathize with the government's legislative intent to efficiently remedy and prevent collective damages and to induce responsible corporate management," but added, "However, we cannot overlook the side effects such as increased costs and decreased competitiveness of companies due to abuse of the system."

They continued, "Therefore, careful review of the expansion and relaxation of collective litigation requirements is necessary, and it is desirable to selectively introduce it in necessary areas through individual laws as is currently done."