In President Geun-Hye Park’s pledge regarding economic democratization (the “Economic Democratization Pledge”), she has pledged to adopt a system which permits class action lawsuits and punitive damage awards. In this regard, lawmakers are actively discussing procedures concerning private enforcement of claims under the Monopoly Regulation and Fair Trade Act (the “MRFTA”).

While commentators have recognized that the current provisions of the MRFTA regarding damage compensation do not provide effective remedies to parties that suffered collective damages and do not effectively deter unfair collaborative acts of enterprisers and also raised arguments that a system permitting class action lawsuits and punitive damage awards are required, there was no consensus on the details of the legal system to be adopted in order to implement such measures.  

However, under President Park’s Economic Democratization Pledge, she suggested a detailed plan to introduce class action lawsuits and punitive damage awards.  

First, with respect to class action lawsuits, the Economic Democratization Pledge stipulates that (i) while a system permitting class action lawsuits would be introduced for cases involving cartels and resale price maintenance under the MRFTA, (ii) such system would be implemented under an “opt-out method” where a court’s decision would be effective to all parties that did not file an explicit notice to opt-out from such case and (iii) the qualification requirements and approval conditions under the Securities-Related Class Action Act would be relaxed in order to ensure the effectiveness of the new system.  

Additionally, with respect to punitive damage awards, the Economic Democratization Pledge stipulates that (i) a system permitting punitive damage awards would first be implemented for cases involving improper reductions of subcontracting prices, unreasonable cancellation of orders and unreasonable return of products under the Fair Transactions in Subcontracting Act and, the scope of application would gradually broaden and (ii) the ceiling for the amount of punitive damage awards would be treble damages.  

In connection with the above, National Assemblymen of the ruling Saenuri Party and the Democratic United Party each proposed a bill to amend the MRFTA regarding class action lawsuits and punitive damage awards as follows. 

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Enterprisers should carefully monitor the legal development of class action lawsuits and punitive damage awards since adoption of such measures are expected to increase filing of private legal actions against enterprisers and thereby significantly affecting the management of businesses overall.