The government and the ruling party are moving to let regulators suspend business operations or revoke registrations of companies that repeatedly engage in price-fixing in sectors closely tied to household spending, such as oil refining and transport. Extending penalties beyond fines to business licenses and corporate structure could strengthen deterrence, but some warn it may weaken competition by reducing the number of market participants.
The Fair Trade Commission (FTC) and the Democratic Party of Korea held a policy consultation meeting at the National Assembly on the 28th to push legislation aimed at stamping out repeat collusion, government officials said on the 29th. The two sides agreed to pursue five legislative measures, including the introduction of registration revocation and business suspension, an extension of the statute of limitations, and the codification of price-reset orders.
The core of the plan is to widen sanctions against repeat offenders to cover business licenses. Seventeen industries are subject to the rules, including firefighting equipment, pharmaceutical manufacturing and imports, high-pressure gas production, electrical construction, oil refining and trading, waste treatment, and passenger and freight transport. Under the revised Fair Trade Act, the FTC would gain legal grounds to ask relevant ministries to suspend operations or revoke the registration of a company that engages in price-fixing twice or more within five years.
Companies that receive leniency benefits by reporting a cartel first will not be exempt when authorities count repeat offenses. Even if a firm has its fine or criminal referral reduced, that cartel still counts toward the "two within five years" threshold. As a result, a company granted leniency could face a suspension or revocation request if it is caught colluding again within five years. The FTC also plans to eliminate the exemption from corrective orders that it has granted to voluntary reporters.
The window for pursuing cartels will also lengthen. The deadline for opening an investigation, now seven years after a cartel ends, will be extended to 10 years, stretching the statute of limitations from a maximum of 12 years to 15. The plan also writes into law price-reset orders, which require companies to reset prices inflated by collusion to levels that restore pre-cartel competition.
The FTC has imposed a series of fines in the hundreds of billions of won on large cartel cases this year. It levied 272 billion won on four major banks for exchanging information on loan-to-value ratios, 408.3 billion won on three sugar makers, 338.3 billion won on six paper companies, 671 billion won on seven flour millers, and 747.6 billion won on four starch and starch-sugar producers. Fines in those five cases alone total 2.4372 trillion won.
The standards for future cartel fines have also grown tougher. In April, the FTC raised the floor for its cartel fine rate to 10% from 0.5% and expanded the maximum surcharge for repeat violations to 100%. With business suspensions and registration revocations now on the table on top of stiffer fines, the scope of penalties against repeat offenders is widening to include their licenses to operate.
The FTC is also pursuing a legal revision that would allow it to order "structural remedies" such as divesting stakes or transferring business units, going beyond monetary penalties. Next month, an economic analysis bureau and a priority investigation planning unit will launch, strengthening its capacity to investigate large and complex cases.
Still, some question whether stacking on more sanctions actually restores competition. "Collusion is a problem that calls for promoting competition among companies, but suspending their operations actually reduces competition," said Hong Dae-sik, chairman of the Council of Korean Law Schools. "I doubt whether this can achieve the goal of restoring competition."
A particular concern is that domestic manufacturing industries, where cartels are frequent, are not highly profitable and are difficult for new entrants to break into. If no new competitor steps in after existing firms are barred from operating or ordered to sell off businesses, the harm could fall on consumers and workers while market competition weakens instead.
The FTC argues that deterrence is hard to secure if penalties fall short of the gains available from collusion. "Fines that significantly exceed illicit gains will become the new standard," FTC Chairman Joo Byung-ki said. "There should be no cases where serious legal violations are punished or sanctioned lightly."
