1

Korea Fair Trade Commission

2007.10

Sang-Seop NOH

Recent Activities of the KFTC

2

I. Contents

1. Framework of Competition Policy

2. What Is Competition Advocacy?

3. Why Is It Important?

4. Recent Activities of the KFTC

3

1. Framework of Competition Policy

What is competition policy? “Policies aiming at maintaining the best functioning of

market economy by securing competitive market structure and free & fair corporate activities”

Competitive structure

Free and fair activities

Maximum market performance• creative business activities• consumer protection• balanced development of the national economy

4

Competition laws mainly consist of the substantive regulations for improving market structure and behaviors.

Regulations promoting competitive market structure M&A control Excessive concentration of economic power, etc.

Monitoring behaviors of the market players Ban on abuse of market dominance Cartels and behaviors of trade associations Ban on unfair business practices

5

Making a good ‘environment for law enforcement’ is even more important than ‘competition law enforcement activities.’

This drives the competition authorities to carry out competition advocacy activities.

6

2. What Is Competition Advocacy?

“All activities of the competition authorities which influence government’s economic and regulatory policies in order to promote competitive industry structure, corporate behavior and better market performance.”

Government intervention is more often found in transitional and developing economies than in developed economies.

Publicity activities are included creating a popular base to support competition policy.

E.g) remove the regulation on supervision in the securities business, which allowed securities companies to collectively decide trading fees

7

3. Why Is Competition Advocacy Important?

There exist various organizations pursuing diverse purposes related to some specific areas.

Doing diverse activities for each body’s policy goals. Difficult to enforce competition laws against all

governmental activities.

Activities exempted from the MRFTA

① Non-commercial activities or activities done by non-enterprises

② Legitimate actions taken in accordance with other Acts or Regulations

③ Legitimate Exercise of intellectual property rights

8

When anti-competitive policies and regulations are in existent, it is hard to expect the competition authority to secure desirable market performance only with its law enforcements.

E. g.)• When a monopoly right is given to a firm by a law• When a monopoly is permitted as a result of giving

license • When a price cartel is guaranteed by a law

9

Anti-competitive institutions and practices are often tacitly implemented in the form of an administrative guidance by the related ministries, while some are clearly stated in laws.

E.g.) A related ministry’s intervention or mediation in

business activities due to excessive competition

10

Competition advocacy activities are essential part of the competition policy.

The benefit of once-and-for-all system improvement by an advocacy activity is equal to the value of corrective orders done by several times

Each party concerned should take the importance of “competition” into account: for policy makers in their policymaking, for firms in their business activities, and the general public in checking and monitoring.

11

The current worldwide trends of economic reforms carried out by means of privatization, regulatory reform, and trade liberalization provide a good cause for the competition authority not to content with its traditional enforcement activities.

Issues for furthering economic and trade liberalization are under active discussion by international organizations such as OECD and WTO.

Making a multilateral competition framework has also became a popular agenda.

12

4. Recent Activities of the KFTC

Abuse of Market Dominance 18 cable system operators(July, 2007) Unilateral termination of group contracts and changing

popular channels from low-cost service to premium service

Surcharge: 216 million Won($230,000) Hyundai Motor Company(Jan, 2007) Compelling its retail store to meet selling quota Restricting its sales agents from relocating or

expanding their stores Surcharge: 23billion Won($24million)

13

Cartel Case Cartel is the Supreme Evil in the market economy,

which undermines the market price system and harms consumer welfare

4 Oil Refineries collusion Increasing the price of gasoline, diesel by collusion Surcharge: 52.6billion Won($56million) 4 Ice cream makers for price fixing Increasing the retail prices of ice-cream Surcharge: 4.6 billion Won($4.9 million)

14

Merger Case DCC’s Acquisition of CCK DCC acquire 100% share of CCC M/S increases by 64.2% No potential for an import increase in the future

Eland Retail’s acquisition of Carrefour Korea ER acquire 50% stake of CK Relevant market: discount store market Local market: within the radius of 5 km Fewer discount stores, lower price competition

15

Money Lending Business Case Conducted on site investigations to detect

misleading advertisements by 20 money lenders Fair Labeling and Advertising Act Unfair and deceptive advertising

16

CCMS(Customer Complaints Management System)

Introduced in 2005 Successful settlement of the voluntary damage

redress system Rewards for exemplary companies: easing of

regulations and issuance of certification marks to more than 50 companies

17

Competition Policy is no longer “luxury” of developed countries but “necessity” of all countries longing for market economy – J. Stiglitz