On June 22, 2012, the government began its enforcement of the revised Enforcement Decree of the Monopoly Regulation and Fair Trade Act (the “Revised Enforcement Decree”) to limit the benefits available to second-place leniency applicants and to increase the sanction for a violation of the duty to file the business combination report. The major revisions can be summarized as follows:
- Limitation on the Benefits Available to Second-Place Leniency Applicants
The Revised Enforcement Decree provides for an exception to the availability of a 50% reduction in administrative surcharges for second-place leniency applicants (i) where the relevant cartel involved only 2 companies or (ii) the second-place applicant applies for leniency after 2 years of the date of submission by the first-place applicant in a cartel involving 3 or more companies. In such cases, the second-place leniency applicant would not receive any reduction to the administrative surcharges.
This revision is understood as an effort to prevent the abuse of the leniency program and to increase the effectiveness of the sanction against abusive cartel activities, and is expected to lead to a more strict application of the leniency program in practice.
- Increases in Administrative Fines for Violation of the Duty to File a Business Combination Report
The Korea Fair Trade Commission (“KFTC”) imposes administrative fines upon companies that fail to file a business combination report pursuant to the Monopoly Regulation and Fair Trade Act. Under the Revised Enforcement Decree, the basic administrative fine has been increased by twice or more. Moreover, since the additional penalty for days of delay in reporting can be up to 150% of the basic administrative fine, the maximum administrative fine may amount to KRW 100 million in total.
As the KFTC has made an effort to increase the severity of sanctions with regards to the violation of the duty to file a business combination report, companies should be careful to comply with the duty to file the report in a timely manner.