[Opinion] SK Inc.'s Administrative Lawsuit Against the Fair Trade Commission Becomes a Public Interest Lawsuit

Choi Joon-sun, Honorary Professor at Sungkyunkwan University School of Law

On the 22nd, the Korea Fair Trade Commission (KFTC) recognized that SK Inc., which acquired LG Siltron, provided business opportunities to its special relation, Chairman Chey Tae-won, and imposed corrective orders along with fines totaling 1.6 billion KRW?800 million KRW each on SK and Chairman Chey. SK acquired 70.6% of LG Siltron's shares, and Chairman Chey acquired the remaining 29.4%. The KFTC judged that SK and Chairman Chey violated Article 23-2, Paragraph 1, Subparagraph 2 of the Fair Trade Act (prohibition of unfair provision of benefits to special relations). It is unclear how SK will respond, but it should not simply accept or compromise with the KFTC’s judgment and let it pass.

Violators of Article 23-2, Paragraph 1, Subparagraph 2 of the Fair Trade Act may face fines, corrective measures, and even criminal sanctions (imprisonment up to three years or fines up to 200 million KRW). Therefore, the legal nature of this provision is both administrative and criminal law. Criminal laws must be interpreted strictly according to the principle of legality, and guilt is recognized only when the legal elements are precisely met. Criminal law is like a formula where inputting the conditions results in an outcome. According to the literal and logical interpretation, SK must have 'provided' a business opportunity that was significantly beneficial to Chairman Chey.

However, in this case, Chairman Chey acquired (shares) not from SK but from the 'creditors' group, and it was an 'acquisition,' not a provision. Cases lacking the applicability of the legal elements cannot be judged as guilty. The KFTC’s guilty judgment in this case is not a 'different form of interpretation' but a 'creative interpretation' that ignores and departs from the law.

According to the KFTC’s press release, the KFTC blames Chairman Chey’s share acquisition for not obtaining approval from SK’s board of directors. However, whether a major shareholder’s personal acquisition of shares from creditors or others outside the company is a matter requiring board resolution is highly debatable. Sharp lawyers likely provided legal opinions stating that 'board approval is not necessary.' The board of directors is not an institution to monitor what major shareholders do outside the company. If monitoring major shareholders’ external actions is one of the board’s duties, what penalties should directors face for violating this duty? All directors of Korean companies should be concerned.

The KFTC also questioned why SK acquired only 70.6% instead of 100% of the 'business opportunity that would bring significant benefits,' judging this as a 'passive provision of business opportunity' by 'forgoing the business opportunity and allowing the recipient (Chairman Chey) to utilize it.' Recognizing a crime by omission, i.e., a 'passive method,' is also a highly creative interpretation that is taboo in criminal law.

If the fine is accepted this time, the day when criminal punishment will be imposed for similar cases is inevitably near. In situations where foreign companies’ equity investments are expected, considering the efficient allocation of resources, if acquiring 100% of a company is difficult, the participation of a major shareholder in equity is a great asset to the company. Preventing this would become yet another unnecessary Galapagos-style regulation. To clarify the duties and responsibilities of directors, this case must be judged by the courts. Therefore, this issue is not just a problem for SK Inc. A lawsuit against the KFTC at this time would become a public interest lawsuit for Korean companies.

Choi Joon-sun, Honorary Professor, School of Law, Sungkyunkwan University