Fair Trade Commission Targets Jinro This Time... Companies Suffer Even If Found Not Guilty

Data Omission: Third Chairman Accusation This Year, Trial Could Last 5 Years
"Only Warning and Accusation as Sanctions, Intermediate Administrative Measures Needed"

[Asia Economy Reporter Lim Hye-seon] The Fair Trade Commission (FTC) recently filed charges against Park Moon-duk, chairman of HiteJinro, stating that "while submitting company status reports, information on five companies wholly owned by relatives was omitted." HiteJinro explained that the company operates under an independent management system unrelated to Chairman Park, who is not involved in management at all, and that there was no intentional concealment or economic gain. However, the FTC did not accept the company's explanation, citing a strong possibility that Chairman Park was aware of the false submission of designated materials.

FTC’s Frequent Filing of Charges

On the 17th, voices from the business community called for improvements in the FTC’s sanction levels. Currently, the FTC’s "criteria for filing charges considering awareness and severity" only allow for either charges or warnings. Filing charges against a group head damages the company’s image. Once a company’s real name is disclosed at the FTC’s charge stage, the company faces a public trial as a ‘malicious company,’ causing significant harm.

An official from an economic organization said, "Due to the dichotomous administrative sanctions of either warnings or charges, excessive measures are being imposed on companies," and added, "There is a need to establish intermediate administrative measures." He also expressed concern that "a company’s hard-earned image built over a long period can be destroyed in an instant."

Cases where the FTC files charges against corporate heads for omission of data have been rare until now. However, this year alone marks the third time the FTC has filed charges against corporate heads for data omission. The industry views this as a demonstration of the FTC’s determination to wield a sharp sword against large business groups. Previously, the prosecution issued summary indictments against KCC Chairman Chung Mong-jin and former Taekwang Chairman Lee Ho-jin, who were charged by the FTC in February this year. A summary indictment is a procedure requesting fines or penalties through a summary order instead of a formal criminal trial, typically used for relatively minor offenses.

Naver and Kakao Ultimately Cleared of Charges

There are also many criticisms that the FTC’s excessive investigations are stifling corporate activities. Companies such as Naver, SPC Group, and Lotte Mart, which faced FTC sanctions, have filed administrative lawsuits one after another. The business community cites the prosecution rate as evidence of the FTC’s excessive investigations.

The FTC is the sole agency with exclusive authority to file charges. After investigating cases, it must hand them over to the prosecution for criminal charges to proceed. According to the National Assembly’s Political Affairs Committee, the number of charges filed by the FTC increased from 57 in 2016 to 82 in 2019, but during the same period, the prosecution’s indictment rate sharply dropped from 70% to 31%.

Lee Hae-jin, Naver’s Global Investment Officer, who was charged by the prosecution for omitting reports from some affiliates to the FTC, was cleared of charges in March last year. Kakao Chairman Kim Beom-su was also indicted on five counts of disclosure omissions and went to trial but was acquitted by the Supreme Court last year. Even if companies are ultimately acquitted after 3 to 5 years of litigation, as in the cases of Naver and Kakao, they have no way to receive compensation.

A business official lamented, "The responsible public officials file charges with the prosecution and boost their performance records, but it can take more than five years for trial results to come out," adding, "Those officials often move to other departments before the trial results are announced and avoid responsibility, but the companies suffer significant damage."