BKL Legal Update - Antitrust 2020 - 8

 National Assembly Passes Amendment to MRFTA

The amendment to Korea’s primary competition law is expected to strengthen procedural fairness throughout

KFTC’s case handling procedures and allow respondents to more actively and effectively respond to KFTC investigations

On April 29, 2020, the National Assembly of Korea passed an amendment bill to the Monopoly Regulation and Fair Trade Act (the “MRFTA”) proposed by the Korea Fair Trade Commission (“KFTC”).  The amended MRFTA (the “Amended MRFTA”) will be promulgated after President Moon Jae-in’s approval, and will take effect one year from the date of promulgation. 

The Amended MRFTA focuses on the procedural aspects of the MRFTA and touches upon all stages of KFTC’s case handling procedures, from filing of complaints and investigation to the deliberation stage.  A summary and implications of the amendment are as follows: 

1.   Background

The MRFTA has undergone several rounds of revision since its enactment in December 1980.  However, concerns remained that the MRFTA does not adequately safeguard respondents’ procedural right with respect to KFTC’s case handling procedures.  There was a consistent call for strengthening respondents’ due process right throughout KFTC procedures considering KFTC’s ability to have a significant impact on person(s) under investigation as the “court of first instance.” 

These concerns were expressed by Bae, Kim & Lee LLC (“BKL”) when it argued that KFTC should afford greater procedural protection to person(s) under investigation, in court cases brought by companies undergoing KFTC investigations.  Courts accepted BKL’s arguments and held that protection should be afforded to respondents’ right to inspect and reproduce the evidentiary documents cited and relied on by KFTC in its examiner’s report and as such, KFTC should provide respondents with access to those evidentiary documents.[1]  Moreover, where KFTC redacted certain critical information in evidentiary documents, the court agreed with BKL and held that such documents were not admissible as evidence to establish facts against the respondents.[2] 

As detailed below, the Amended MRFTA reflects major arguments made by BKL and adopted by the courts in the above cases.  Overall, the Amended MRFTA seeks to provide clarity and better protect respondents’ ability to exercise their defense right at different stages of KFTC procedures. 

2.   Summary of key changes to the MRFTA

(1)     Standards for reporting violations

Prior to the amendment, anyone who “recognizesthat there is an act violating the MRFTA” was allowed to file a complaint with the KFTC for suspected violations of the MRFTA.  The Amended MRFTA provides that anyone can file a complaint on “an act violating the MRFTA”, making it simpler to report a possible violation.[3] 

(2)     Mandatory production of official notice

The MRFTA only required KFTC investigators to show proof of investigative authority at the time of starting an on-site investigation.  The Amended MRFTA additionally requires investigators to deliver an official notice, prior to an on-site investigation, specifying details such as objectives, anticipated duration and method of their on-site investigation.[4]  While such requirement had been included in Article 6 of KFTC’s Rules on Investigative Procedures (the “Procedure Rules”), it was fully adopted in the Amended MRFTA to further prevent potential “fishing expeditions” by investigators. 

(3)      Limitations on time and duration of on-site investigations

The MRFTA was silent on when and for how long KFTC’s on-site investigations may be conducted.  The Amended MRFTA adopts Article 15 of the Procedure Rules and requires its investigators to conduct on-site investigation during normal business hours, allowing exceptions to such requirement only when investigators would not be able to achieve their objectives during business hours (e.g., in the event of concerns regarding evidence tampering / destruction) and upon consultation with the person(s) under investigation.[5]  In addition, under the Amended MRFTA, investigators are required to end on-site investigations within the timeframe specified in its official notice; if additional time is required due to exceptional circumstances, investigators may extend the on-site investigation but should minimize any disruption to business operation and provide a revised official notice indicating the changed duration of investigation.[6] 

(4)     Mandatory provisions on materials submitted during on-site investigations

The MRFTA did not stipulate procedural rights with respect to materials and items taken temporarily and stored by KFTC investigators during on-site investigations.  The Amended MRFTA makes it mandatory for investigators to issue a report listing any materials and items voluntarily submitted by person(s) under investigation and stored by investigators.  In addition, the Amended MRFTA requires investigators to return such materials or items as soon as it is determined that they are irrelevant to KFTC’s investigation objectives or no longer needed after achieving such objectives.[7] 

(5)      Right to submit opinion and right to testify during investigation

Under the MRFTA, respondents and interested parties were allowed to submit opinion on the case only at the deliberation stage, i.e., only after KFTC’s issuance of examiner’s reports setting forth KFTC’s findings and allegations against respondents.  The Amended MRFTA allows person(s) undergoing KFTC investigation to exercise defense rights throughout all stages of investigation / examination by testifying or submitting opinion (including opinions of witnesses) before KFTC issues an examiner’s report.[8] 

(6)     Respondents’ right to inspect and reproduce evidentiary documents

The MRFTA allowed respondents or interested parties to inspect and reproduce evidentiary documents used by KFTC in examiner’s reports only if the provider of the relevant information consents to the disclosure, or if disclosure of such materials is deemed necessary for public interest.  Therefore, in most cases, respondents had difficulties accessing and effectively challenging evidence used against them. 

However, under the Amended MRFTA, respondents’ inspection and reproduction of evidentiary documents will in principle be allowed upon request; only information protected under law (e.g., trade secrets and materials related to leniency applications) will be kept undisclosed as an exception to the general requirement for disclosure.[9]  Further, if KFTC rejects a respondent’s request for inspection and the respondent thereafter files a lawsuit against KFTC to overturn its refusal, the court’s review of the document disclosure issue will suspend the limitation period within which KFTC is required to make decisions regarding the MRFTA violation case.[10]

(7)      Mandatory notification when no disposition is made

While the MRFTA required KFTC to send written notice of the results of investigation to the person(s) under investigation, it did not explicitly require KFTC to send such notice if it chose not to make a final disposition of their case.  The Amended MRFTA makes it mandatory for KFTC to give written notice to the person(s) subject to investigation if KFTC decides not to make a disposition including by suspending investigation, setting forth the decision made and the basis and reasons for such decision.[11] 

(8)     Limitations on investigative actions during the deliberation stage

The MRFTA was silent on whether KFTC was permitted to conduct further on-site investigations or interview the person(s) subject to investigation once an examiner’s report is issued.  To address this, the Amended MRFTA prohibits investigators from conducting on-site investigations or interviews once an examiner’s report is issued, unless an application for an exception is approved by the relevant KFTC commissioners in charge of reviewing the case.[12]  

(9)     Evidence taking during the deliberation stage

The MRFTA was silent on whether KFTC could evaluate evidence once an examiner’s report is issued.  The Amended MRFTA stipulates that if deemed necessary for the case deliberation, KFTC may evaluate evidence on its own initiative or upon request by the parties and that, if a request for evidence evaluation is denied, the chairperson that presides over the relevant hearing is required to disclose the reasons for such denial.[13]  

(10)   Revised limitation period for KFTC’s disposition

The MRFTA required KFTC to make a disposition on any alleged violation within five (5) years from the date of commencement of investigation or, where no formal investigation has been launched, within seven (7) years of the date on which such alleged violation ceased.  Due to this bifurcated approach, KFTC could effectively extend the limitation period to up to twelve (12) years by launching an investigation immediately before the seven-year limitation is reached.  Critics also pointed out that the limitation period was too long compared to the periods applicable to violations of other laws.

The Amended MRFTA applies for all types of cases a uniform limitation period of seven (7) years from the date on which the alleged violation ceased, unless the violation relates to cartel which may not be discovered until after a long time has passed and which also requires a significant amount of time to investigate.[14]  However, the bifurcated provision under the MRFTA continues to apply to cases where an investigation is launched before the Amended MRFTA becomes effective. 

(11)       Conferral of exclusive jurisdiction to the Seoul High Court of Appeals

The MRFTA provided that KFTC’s decisions may be appealed to “the Seoul High Court of Appeals, which has jurisdiction over KFTC by virtue of its location”, even though KFTC has relocated its head offices from Seoul to Sejong City.  To address this discrepancy, the Amended MRFTA confers an exclusive jurisdiction over the appeal of KFTC’s decisions to “the Seoul High Court of Appeals”.[15]  

(12)   Introduction of a consent decree implementation management system

Under the MRFTA, the only requirement prescribed to respondents in connection with consent decree implementation was to submit an implementation plan and an implementation report.  In order to better manage the implementation of consent decrees, the Amended MRFTA introduces a consent decree implementation management system whereby KFTC can monitor the progress of implementation and request the implementing party to submit supporting documents.  The new system allows KFTC to delegate to certain agencies such as the Korea Consumer Agency and the Korea Fair Trade Mediation Agency the task of managing the implementation of consent decrees.  If the task is delegated, these agencies will be required to provide a progress report to KFTC on a quarterly basis or promptly upon KFTC’s request and the officials who manage the delegated task will be subject to a duty of confidentiality.[16]  However, the provision under the MRFTA continues to apply to cases where a consent decree application is submitted before the Amended MRFTA becomes effective. 

3.   Implications

KFTC anticipates that the Amended MRFTA will enhance due process and transparency throughout its case handling procedures, thereby promoting KFTC’s quasi-judicial position as the “court of first instance.”  KFTC expects that this will ultimately increase public confidence in KFTC’s case handling capabilities and that individuals and businesses subject to KFTC investigations will be able to more actively respond to KFTC investigations. 

Nonetheless, there remains the risk that respondents’ procedural right of defense may be infringed during investigation, and obtaining timely legal advice will be more important than ever to take full advantage of the enhanced response mechanism.  BKL remains committed to representing clients’ best interests and protecting their due process rights, drawing on the extensive knowhow gained from its competition law practice.