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KFTC’s Work Plans for 2022
- Fair markets, innovating companies, and consumers in the driver’s seat

January 4, 2022 Competition Policy Division

Below are the details of the Korea Fair Trade Commission’s (led by Chairperson Sung-wook Joh, hereinafter the “KFTC”) work plans for 2022.

1. Promote competition in digital markets and enhance consumer rights and interests

First, the KFTC will step up monitoring of unfair practices in the innovation field. The KFTC will closely monitor platform operators’ abuse of their dominant position, including self-preferencing* in mobility and online shopping and prevention of multi-homing** in app markets. In addition, the KFTC will strengthen monitoring of unfair practices concerning intellectual property rights, such as requiring the transfer of a secondary copyright on webtoons and web fictions and blocking the entry of rival platform operators in music copyright markets. In the field of new digital content such as the metaverse and the NFT, the KFTC will check whether essential terms and conditions are provided to consumers and whether they are given a cooling-off period. The KFTC will make improvements to our plans by looking into current issues, including complicated cancellation procedures and excessive cancellation fees charged by digital subscription services like music streaming and the OTT.

* Abusing a dual role as both a referee and a player to monopolize relevant markets through self-preferencing
** Online platforms preventing online stores from doing business with rival platforms to solidify their monopolistic position

Second, the KFTC will establish basic norms for a fair digital economy. The KFTC will legislate the “Act on Fairness in Online Platform Intermediary Transactions” to protect small business owners and consumers and will completely amend the “Act on the Consumer Protection in E-Commerce.” The KFTC will also establish the “Guidelines for Unilateral Conduct in Platform Markets” that specify market definitions and dominance assessment criteria and list major types of anti-competitive practices. We will improve the criteria for reviewing M&As in response to platforms’ transferring or strengthening their dominance through M&As. The KFTC will closely monitor global trends of regulating monopolistic big tech companies by enforcing competition laws. Furthermore, the KFTC will actively participate in discussions with foreign competition authorities.

Third, the KFTC will create a competitive market environment that fosters innovation. The KFTC will keep a close eye on anti-competitive practices, such as collusion and illegal cartel conduct of business entities occurring in the contactless transaction area, including job searching platforms and online legal services. The KFTC will proactively respond to M&As of new industries including e-commerce, software, and bio and closely monitor and deal with M&As in the form of corporate restructuring (e.g. airlines). The KFTC will encourage more companies to enter markets by improving regulations regarding public contracts and starting a new business. Moreover, the KFTC will promote a culture of voluntary compliance by creating a legal basis of the Compliance Program (CP).

Fourth, the KFTC will build a system that guarantees consumer rights and interests. The KFTC will revise standard terms and conditions for online shopping and games so that online businesses not only protect consumers’ information provided for subscriptions but also their personal information collected automatically after signing up for subscriptions. The KFTC will modify consumer dispute resolution standards for digital and ICT items, such as the holding period for EV battery components and compensation standards for 5G and high-speed Internet. Moreover, the KFTC will enhance access to digital information and help consumers develop capabilities to use information by providing ecommerce education tailored to their individual life cycle*.

* (E.g.) Teenagers: Provide hands-on learning to prevent consumer harm
Adults: Teach most frequent types of consumer harm
Elderly citizens: Close digital gaps

2. Create an inclusive trade environment between large companies and SMEs

First, the KFTC will promote win-win cooperation between large companies and SMEs. The KFTC will revise standard trade contracts in areas like online shopping malls and TV home shopping, which are rapidly growing due to the spread of non-face-to-face consumption. In addition, the KFTC will expand the scope of the ‘Guidelines for Stable Contract Renewal of Long-Term Stores’ to encompass the overall food service industry* in addition to chicken, bakery, and convenience store franchises. The Guidelines were first introduced to encourage franchisors and franchisees to sign a long-term contract.

* (E.g.) Coffee, fast food, Korean food, and etc.

Second, the KFTC will improve trade conditions for SMEs and small business owners and strengthen their bargaining power. The KFTC will improve the process for registering and disclosing the Franchisee Disclosure Document so that those who wish to run a franchise can receive information that they need more quickly. The KFTC will create detailed procedures for disclosing subcontract payment conditions to tier 1 suppliers of large companies and come up with plans and procedures to discussadjusting payments to subcontractors with the Korea Federation of SMEs. The KFTC will regulate the percentage of franchisees that the franchisor must obtain prior consent from when advertising or holding a promotional event with franchisees bearing the cost.

* When applying for registration of the Franchisee Disclosure Document, the Disclosure Document will be accepted and disclosed immediately when the examination starts (within three days on average after its acceptance)

Third, the KFTC will root out unfair practices that occur by taking advantage of power imbalances. The KFTC will watch how payments are provided to subcontractors in the automobile sector where the transition to electric vehicles is taking place. In addition, the KFTC will step up monitoring of industries highly engaging in exclusive dealing, for example, chemicals. The KFTC will keep watch on franchisors providing false or exaggerated information and giving disadvantages to franchisees for forming an association and issue an alert to prevent harm arising from unfair practices. The KFTC will examine unfair practices* frequently occurring in online retailing and other common types of unfair practices, like outlet malls or shopping centers passing on promotional costs. The KFTC will expand the scope of our study conducted on franchise business to include all industries and intensively monitor unfair practices in the fields of medical equipment, clothing, and automobile sales. The KFTC will strengthen protection of SMEs’ technologies by creating and distributing a standard non-disclosure agreement and building a center to anonymously report technology theft.

* (E.g.) Demanding exclusive dealing, unfairly taking sales incentives, and passing on promotional costs

Fourth, the KFTC will enhance regional capacity to address gap-eul relations. The KFTC will expand the role of local governments to mediate disputes occurring in subcontracting and distribution. The KFTC will listen to opinions of experts, SMEs, and local cities on role and responsibilities of the KFTC and local governments to appropriately share responsibilities.

3. Establish a sound corporate governance structure and a trade order for large business groups

First, the KFTC will improve consistency and rationality of the regulatory system of large business groups. In order to designate large business groups more rationally, the KFTC will create the criteria of the same person and find ways to rationally make the scope of a person related to the same person. The KFTC will study the use of financial products which have similar effects to debt guarantees between affiliates, such as a deficiency agreement and the Total Return Swap (TRS).

Second, the KFTC will increase monitoring of illegal insider trading. The KFTC will closely watch illegal insider trading by large business groups happening mainly in industries closely related to people’s lives, such as heating appliances, housing, clothing, fashion, and restaurants. The KFTC will step up monitoring of evading regulation of illegal insider trading by using fake affiliates and efficiently monitor illegal insider trading through cooperation with the National Tax Service and the Financial Supervisory Service. The KFTC will improve the Safety Zone criteria for supporting unfair conduct in order to focus our investigation capacity on serious anti-competitive conduct and ensure that the laws are predictable.

* (Before) Excluded based on the difference from the normal rate and the amount of support for fund transactions only
(After) Excluded based on the difference from the normal price and the total transaction amount for all types of transactions

Third, the KFTC will provide useful information in a timely manner, for market monitoring to function autonomously. The KFTC will find disclosure items related to the governance structure to promote ESG management and change the disclosure method from simple listing to a user-friendly method. The logistics and IT industries where insider trading frequently occurs will have to disclose their information about not only sales but also their purchases. Information about assigning trademarks must be fully disclosed to build a sound trading environment.

* (Current) Fee calculation methods, trademarks received according to presence or absence of the head of a company, and the percentage of shares owned by the head
(Added) Trademark received compared to sales, information about a company with a high proportion of using overseas trademarks

Fourth, the KFTC will provide education, announce new laws, and take better response in order to bring regulatory stability. The KFTC will provide education and announce new laws through cooperation with economic organizations to help businesses better understand new laws and encourage them to voluntarily comply with the Monopoly Regulation and the Fair Trade Act and its related regulations. The KFTC will launch a committee with related agencies (Fair Trade Commission, Ministry of SMEs and Startups, and Financial Supervisory Service) to check the process of registration and operation of Corporate Venture Capital (CVC) companies.

4. Address unfairness and consumer harm that can occur while stepping toward a gradual return to normal life

First, the KFTC will proactively respond to unfair practices occurring in areas that will see high demand with the gradual return to normal life. The KFTC will closely monitor unfair practices of platform operators, including Online Travel Agencies (OTA) and hotel booking apps, harming small and midsized hotels and travel agencies. The KFTC will examine and revise unfair provisions, such as unilateral contract termination and imposition of excessive penalties by golf clubs, funeral homes, and university dormitories.

Second, the KFTC will prevent unfair practices and infringement of consumer rights and interests in the health sector, taking advantage of the pandemic situation. The KFTC will watch unfair conduct, such as providing rebates to health professionals and establish and implement fair competition regulations to prevent illegally attracting consumers with dietary supplements. The KFTC will increase inspections of hygiene and health related products as their demand is growing and check products that have not been tested for safety, like products claiming to be effective in preventing viruses.

5. Take quick and effective response to unfair practices and provide remedies to mitigate consumer harm

First, the KFTC will improve its case handling system to enhance our capacity of responding to unfair practices. The KFTC will set up three sub-teams under the ‘Case Handling Improvement Taskforce’ to make the case handling procedure more swift and efficient.

* [Sub-team for work improvement] Examine case handling work, improve case investigations, management, and systems
[Sub-team for organization restructuring] Restructure performance evaluation, education, organization, staffing systems
[Sub-team for work adjustment] Strengthen collaboration with local governments, government affiliated organizations, and etc.

Second the KFTC will widely use the Alternative Dispute Resolution (ADR) system to resolve disputes quickly and provide remedies. The KFTC will introduce an appraisal system to raise the dispute mediation rate when it comes to addressing late payments to subcontractors or SMEs. In order to mediate disputes more efficiently and wisely, the Dispute Mediation Committee will have standing commissioners in each field.

Third, the KFTC will build infrastructure for the vulnerable so that they can take response on their own when experiencing unfair practices. The ‘Franchise Support Center,’ which provides advice and education on harm prevention and resolves disputes, will provide support to other areas involving gapeul relations. Civil remedies introduced by the Monopoly Regulation and the Fair Trade Act and the Fair Transactions in Subcontracting Act, including giving the court a power to order submitting documents, will be applied to the Fair Transactions in Franchise Business Act, the Act on Fair Transactions in Large Retail Business, and the Fair Agency Transactions Act.

*The Korean text of the documents is confirmed to be authentic and English version is only for reference

https://www.ftc.go.kr/eng/cop/bbs/selectBoardList.do?key=515&bbsId=BBSMSTR_000000002402&bbsTyCode=BBST18