Previously, a leniency applicant could not dispute a notice of non-recognition of leniency status issued by the Korea Fair Trade Commission (hereinafter the “KFTC”) during the investigation stage since this was not deemed to be a separate “disposition” by the KFTC. Rather, such applicant had to wait for the final decision of the KFTC to be issued to dispute the administrative surcharge by arguing that it was improper not to grant reductions based on non-recognition of leniency status. However, recently the Supreme Court held that a notice of non-recognition of leniency status issued by the KFTC constitutes a separate “disposition” by an administrative agency and, accordingly, an applicant that submitted an application for leniency to the KFTC but did not receive a leniency confirmation from the KFTC may now appeal such decision by commencing a separate administrative litigation prior to the issuance of the final decision (Supreme Court, 2010Du3541, rendered on September 27, 2012).
Background of the Case
Immediately after the KFTC conducted an investigation of an alleged cartel, “Company A” was the first-ranked applicant to submit a leniency application to the KFTC and, subsequently, “Company B” filed a leniency application as the second-ranked applicant to the KFTC. After Company A and Company B submitted the above leniency applications, each company respectively submitted materials which could establish the existence of the above cartel.
However, the KFTC reasoned that Company A failed to submit evidence which could establish such cartel and issued a notice of non-recognition of leniency status to Company A. Conversely, the KFTC reasoned that Company B constituted the first applicant to actually provide evidence to establish such cartel and issued a notice confirming first-ranked status.
With respect to the above, Company A commenced an administrative litigation against the KFTC seeking to cancel the notice of non-recognition of leniency status to Company A as well as the notice confirming first-ranked status to Company B.
Contents of the Supreme Court’s Decision
In the above administrative litigation, the Seoul High Court held that the notice of non-recognition of leniency status to Company A and the notice confirming first-ranked status to Company B was an intermediate/provisional/variable determination by the KFTC which was made in the process of preparing for the final disposition and, since this cannot be deemed to establish any rights or obligations or directly cause changes in the benefits based on the law, such determination does not constitute an administrative disposition. Based on such reasoning, the Seoul High Court dismissed the case.
Subsequently, Company A appealed the above Seoul High Court decision to the Supreme Court. The Supreme Court noted that a party should be permitted to avoid future harm by first contesting the legality of the KFTC’s notice of non-recognition of leniency status in order to resolve any legal uncertainty at the stage of the KFTC investigation. In this connection, the Supreme Court held that the notice of non-recognition of leniency status constituted a separate disposition by the KFTC which could be separately appealed through administrative litigation prior to the final decision.
However, with respect to the notice confirming first-ranked status to Company B, the Supreme Court determined that there would be no interests in litigation since (i) even if Company B’s leniency confirmation was canceled if it was determined to be illegal, such leniency status would not transfer to Company A and (ii) in the event that the notice of non-recognition of leniency status to Company A was found to be illegal and canceled, Company A can still receive the benefits from such determination irrespective of the KFTC’s leniency confirmation of Company B.
Implications of the Decision
While the Monopoly Regulation and Fair Trade Act (hereinafter the “MRFTA”) has detailed regulations regarding the requirements and procedures for applicants that file an application for leniency in order to receive a reduction or exemption of the administrative surcharge and/or corrective order, it does not have procedures to provide relief to applicants that filed an application for leniency but did not receive leniency confirmation.
Due to such circumstances, an applicant that received a notice of non-recognition of leniency status at the KFTC’s investigation stage did not have any clear procedures or methods to obtain relief and could only dispute such non-recognition of leniency status after the final decision was issued by arguing that the administrative surcharge was not properly reduced due to such non-recognition of leniency status. However, based on the above decision of the Supreme Court, such applicants may now dispute the notice of non-recognition of leniency status through a separate administrative litigation.