[Reporter’s Notebook] Increasing Corporate Burden to Eradicate Unfair Support Is Not the Answer

[Sejong=Asia Economy Reporter Joo Sang-don] The Fair Trade Commission (FTC) is pushing for a measure that requires companies to report corrected transaction details in order to eradicate unfair support practices. While the FTC has so far focused on detecting and rectifying unfair support acts, going forward, companies will be asked to periodically inform the FTC of changes in transaction practices and details.

According to the Public Procurement Service’s Nara Market, the FTC has commissioned a research project titled “Analysis of Internal Transaction Patterns of Corporate Groups.” Judging by the title, the FTC aims to analyze changes in internal transaction behaviors of companies through cases of unfair support and private interest exploitation it has uncovered, and to develop countermeasures accordingly.

However, a closer look suggests that this does not necessarily mean imposing a heavier burden on companies. Until now, corrective actions have been limited to orders to cease and desist unfair support acts once detected, so the intention appears to be to enhance the effectiveness of these corrective measures.

The FTC cited the example of preferential treatment in business dealings. It proposed a system where companies report to the FTC who their transaction partners are in the relevant fields over a certain period, and the transaction volume with each partner. Additionally, for intermediary fee transactions (so-called “tollgate” transactions) that collect commissions, companies would report changes in transaction structures following FTC sanctions. Although the reporting targets, periods, and frequency may vary, the bottom line is that companies found guilty of unfair support will be additionally obligated to report their transactions.

Since the Moon Jae-in administration, the FTC’s tightening of corporate regulations has often been seen as excessive. Recent data shows that more than one in ten investigations into companies for alleged violations ended with no charges, and when including appeals, recalculations of fines, and suspension of investigations, this rate rises to 45.1%.

The Monopoly Regulation and Fair Trade Act, or the Fair Trade Act, prohibits unfair support practices with the purpose of curbing economic concentration and promoting healthy competition to establish a fair trading order. It is necessary to reflect on whether the FTC’s proposed improvements to corrective measures might inadvertently become another form of corporate straitjacket that only increases the burden on companies.