In a ground-breaking development, on August 21, 2018, the Korean Ministry of Justice (KMOJ) and the Korea Fair Trade Commission (KFTC) signed an agreement that, if enacted into law, would fundamentally change Korea's cartel enforcement system. To date, for close to 40 years, the KFTC has held the exclusive right to refer cartel matters to the KMOJ for criminal investigations. Under the new agreement, the KMOJ will now have the power to open a criminal investigation without waiting for the KFTC's criminal referral when the suspected conduct is one of the four types of so-called "hard-core" horizontal collusion: price-fixing, output/supply restriction, market division, or bid-rigging. Moreover, while both agencies will share concurrent jurisdiction, the KMOJ will have the priority to open a criminal probe when the suspected conduct may gravely injure the economy or cause public rebukes.
As part of the agreement, there will be significant changes to Korea's current leniency regime. At the moment, both the first and second-in-line leniency applicants are exempt from the KFTC's criminal referrals to the KMOJ. However, under the new system, only the first-in-line leniency applicant "may" be exempt from criminal liability depending upon the KMOJ's final decision upon the KFTC's recommendation and the degree and extent of the leniency applicant's cooperation and assistance in connection with KMOJ's criminal investigation and prosecution of co-conspirators. The second-in-line applicant may receive a reduction in criminal penalties and administrative fines. Other conspirators may also receive a reduction depending on the level of their cooperation with the KMOJ.
The KFTC will remain as the repository of leniency applications. However, the KMOJ will now have real time access to leniency applications.
The abolition of the KFTC's exclusive criminal referral right has been a perennial topic for academic debates and policy consideration for a long time. But under the new Moon Administration, the debate gained further momentum not seen under the past Administrations and the two agencies have been in serious discussions for reform in recent months.
Some commentators may feel that the abolition of the KFTC's long-held exclusive criminal referral right may reduce the incentive to apply for leniency because now even the first-in-line applicants would face more uncertainty than ever before and the information provided in leniency applications can trigger various other criminal investigations. On the other hand, others point out that the new regime may actually increase the incentive to apply for leniency now that the KMOJ's criminal probe is almost a certainty. The two agencies still need to work on further details of the revamped cartel enforcement regime. To that end, the two agencies further agreed to form a committee to discuss and coordinate their actual implication of the new cartel enforcement regime.
To become binding, the National Assembly will need to enact the content of the KMOJ-KFTC agreement into law.
This note has been previously posted on the online post board of the ABA Antitrust Section’s International Committee and Cartel and Criminal Practice Committee. It was also previously distributed to members of the ABA International Section’s International Antitrust Committee.