The inauguration of Mr. Suk-yeol Yoon as the twentieth president of the Republic of Korea took place on May 10, resulting in a shift in governing party from the Democratic Party to the People Power Party. It is anticipated that this political shift will bring about changes in various public policies.

In a policy booklet published by the People Power Party (the “Policy Booklet”) as part of President Yoon’s election campaign, President Yoon announced that one of his goals is to realize a “fair society” and, as a specific means to achieve such goal, he has pledged to enhance public policies relating to fair trade.

In this article, we have reiterated some of the main features of fair trade policies included in the Policy Booklet in order to assess the anticipated changes in fair trade policies during the new presidency.

1. Regulation of Online Platforms

President Yoon’s position with respect to the regulation of online platforms as stated in the Policy Booklet may lead to the reconsideration of online platform regulations promoted during the previous regime.

 

 
P. 108, Policy Booklet
  •  Regulating unfair practices in the digital platform economy and enhancing consumer rights.

- To avoid any disruption of the dynamics of the platform industry and its innovation, the main principle will be self-regulation and minimized government regulation.

Since the announcement of the “Eradication of Unfair Trade among Online Platforms and Fair Digital Economy Policy” by the Korea Fair Trade Commission (“KFTC”) in June 2020, there had been discussions for the enactment of legislation regulating unfair trade practices of online platform operators against platform-using businesses. However, the proposed bill was not passed at the ad-hoc national assembly held in January 2022.

With the proposed bill not having been passed during the previous regime, the current regulation of online platforms may be reconsidered in its entirety under the new regime’s basic direction of “self-regulation/minimized government regulation.” For example, new legislation may lean toward curtailing the scope of business providers subject to regulation or reducing the minimum contract terms an online platform operator should include in its agreements with third parties. Even further, the possibility that no additional legislation will be enacted, on the basis that current fair trade law is adequate to regulate online platform providers, cannot be ruled out completely.

2. Discretionary Power of the KFTC to File a Criminal Complaint

The KFTC may retain its discretionary power to file a criminal complaint, but with limits put in place by adjusting the roles of the KFTC and the prosecutor’s office.

 

 
P. 108, Policy Booklet
  •  With respect to the exercise of discretionary power to file a criminal complaint and power to request for the filing of a complaint in the case of severe misconduct, the adjustment of roles and objective standards are necessary.
  •  Exercising the discretionary power to file a criminal complaint in a strict, fair and objective manner.

- Balanced operation with the Ministry of Small and Medium-sized Enterprises and Startups’ system of request for the filing of a complaint, etc.

However, while he was a candidate for Prosecutor General, President Yoon stated in his response to the National Assembly’s questionnaires that, “the repeal of the KFTC’s discretionary power to file a criminal complaint is necessary in order to achieve a fair economic order, such as the deterrence of hardcore cartel activities which constitute a severe crime.” Thus, there still is a possibility that the KFTC’s discretionary criminal complaint filing power may be repealed.

The Policy Booklet’s pledge to operate the KFTC’s discretionary power to file a criminal complaint (the “Discretionary Filing System”) in balance with the system of request for filing by the Ministry of SMEs and Startups, etc. (the “Requested Filing System”) is noteworthy. Considering the on-going heated debate between opponents of the Requested Filing System who argue that it is abused to the extent there are growing management uncertainties among corporates and its proponents who argue that the Requested Filing System has been well-managed, it will be interesting to watch how the new regime will operate the Requested Filing System.

3. Regulation of So-Called ‘Power-Imbalanced Relationships’

With respect to regulations on the so-called “power-imbalanced relationship (‘갑을 관계’ in Korean),” the Policy Booklet pledged to (i) implement a system to prevent the extortion of technologies belonging to small and medium-sized enterprises (“SMEs”) and (ii) introduce a price linkage system between raw materials and goods or services based thereon.

 

 
PP. 108-109, Policy Booklet
  • Implementation of a fair trade system to prevent and remedy the extortion of a SME’s technology.

- Promotion of policies to effectively operate preventive measures, system for enforcement of strict and fair legislation, and remedies for the technology extortion suffered.
  • Collection of data on the price fluctuation of raw materials, subcontractor business relationships and contracts.
  • Improvement of systems to ensure negotiations will take place for the adjustment of the supply price in the event of a surge of raw material prices exceeding a certain threshold.

- Proxy negotiations conducted by the SME Cooperatives or Korea Federation of Small and Medium Business.

  • Review of the introduction of a price linkage system to automatically reflect a change in raw material price in the supply price.

During the previous regime, the KFTC announced its intent to eradicate the misappropriation of SME technologies by the conglomerates in 2017 and commenced ex officio investigations thereon. The KFTC has since been continuously regulating a principal’s demand for the submission and misappropriation of the technology data of a contractor/subcontractor (Article 12-3, Fair Transactions in Subcontracting Act (the “FTSA”)). In addition, obligations on conglomerates with respect to technology data were enhanced with the enactment of the Act on the Promotion of Collaborative Cooperation between Large Enterprises and Small-Medium Enterprises (the “PCCA”). This has led to growing concerns from the business sector.

Considering the new regime’s pledge in the Policy Booklet – to enhance regulations on the extortion of technologies – it is possible that the current direction of KFTC enforcement, such as large-scale ex officio investigations on the demand and misappropriation of technology data, may be maintained during the new regime.

In addition, a new system may be introduced to allow supply prices to reflect changes in the price of raw materials. The FTSA and PCCA already provide that a contractor/subcontractor may request an adjustment of the contract price if there is a change in the supply cost.

The policy pledged in the Policy Booklet appears to take a further step by (i) placing an obligation on the principal to respond to a request for supply price adjustment and (ii) introducing a price linkage system to automatically reflect a change in the raw material price in the supply price.

4. Regulation of Large Business Groups

With respect to regulations on large business groups, the new regime may narrow the scope of ‘familial relationships’ encompassing ‘persons related to the same person’ (which is a Korean legal concept used in the determination of an affiliated relationship) which currently includes blood relatives within the sixth degree and other relatives by affinity within the fourth degree.

 

 
P. 63, Policy Booklet
  • Considering that the current scope of familial relationships constituting specially-related persons under applicable corporate/finance laws (blood relatives within the sixth degree and other relatives by affinity within the fourth degree) is archaic and often results in a relative’s previously unknown business becoming an affiliate of another company, the reform of applicable laws is necessary.

*Public poll on national perception of familial relationships, carried out by the Federation of Korean Industries:
relatives within the third degree (34.3%), relatives within the fourth degree (32.6%), immediate family members (11.6%) (September 2021).

  • Improvements to ensure reasonable operation of the system of specially-related persons under applicable corporate/finance laws.

- Adjustment to a reasonable scope of familial relationships.
- Recognition of exceptions when there is no mutual economic relationship, etc.

The current scope of familial relationships encompassing persons related to the same person include blood relatives within the sixth degree and other relatives by affinity within the fourth degree (Item ga, Subparagraph 1 of Article 4, Enforcement Decree of the Monopoly Regulation and Fair Trade Act). The KFTC has internally acknowledged the need for reconsideration of the scope of familial relationships. As the scope of persons related to the same person is specified by presidential order, a policy change may be anticipated in the near future.