Enforcement proceedings in dominance in South Korea

Enforcement proceedings

Which authorities are responsible for enforcement of the dominance rules and what powers of investigation do they have?

The KFTC is responsible for enforcement against abusive acts. For such enforcement purposes, article 50 of the MRFTA stipulates that the KFTC may take the following measures:

• a summons to a hearing of the relevant parties, interested parties or witnesses to seek their opinions;
• the designation of an appraiser and entrustment of the appraisal;
• an issuance of an order to an enterpriser, an enterprisers’ organisation or an executive or employee thereof for a report on the cost and business situation, for the presentation of other necessary materials or objects, or detention of presented materials or objects; or
• access to the office or place of business of the dominant firm or its organisations for an on-site investigation.

What sanctions and remedies may the authorities impose? May individuals be fined or sanctioned?

When it has found that an act violates article 3-2, the KFTC may order the dominant firm to discontinue the act of violation, publish the fact that it is ordered to make correction thereof and take other measures necessary for correction (article 5 of the MRFTA) and impose upon the firm an administrative fine not exceeding an amount equal to 3 per cent of the relevant turnover. In this case, however, the KFTC’s finding of a violation would not be a prerequisite to a private plaintiff’s damages action. Of course, in that case, the private plaintiff itself will have to prove first that the accused abused its dominant position. When no turnover exists or when it is difficult to calculate the turnover, an administrative fine may be imposed by up to 1 billion won (article 6 of the MRFTA). The KFTC may seek to impose imprisonment for not more than three years or a fine not exceeding 200 million won by filing a complaint with the prosecution (article 71(1) and 66(1)(1) of the MRFTA).

There are no structural remedies available for the KFTC against abusive acts.

The highest fine ever imposed by the KFTC to date for abuse of dominance is 1.03 trillion won in the Qualcomm case of January 2017 (Qualcomm II) - a case pending before the Seoul High Court (see question 29).

Can the competition enforcers impose sanctions directly or must they petition a court or other authority?

The KFTC can impose sanctions directly without having to petition a court or other authority.

What is the recent enforcement record in your jurisdiction?

According to the KFTC’s 2017 Annual Statistics, the most recent year for which such official statistics are available, there have been 12 investigations, and all of them were concluded. Among the 12 concluded cases, one was subject to an administrative fine, three were subject to corrective orders and one was subject to a KFTC warning. Since the implementation of the MRFTA on 1 April 1981, there were 94 issuances of KFTC corrective measures. In particular, of the 94 issuances, 44 corrective measures - 46 per cent of the total issuances - were issued for unfair interference with business activities of other companies pursuant to article 3-2(1)3 of the MRFTA (2016 KFTC Annual Statistics, page 3, 48).

The length of proceedings may vary depending on cases.

The highest fine to date was imposed in Qualcomm II. In January 2017, the KFTC imposed a corrective measure and an administrative fine of 1.03 trillion won for Qualcomm’s alleged abuse of a market-dominant position and unfair trade practice in the modem chipset and Standard Essential Patents (SEP) licensing for mobile communication markets. The KFTC found that Qualcomm refused or limited licensing of its SEP to competing modem chipset makers and coerced mobile handset makers into unfair licensing agreements. Qualcomm appealed the KFTC administrative decision to the Seoul High Court seeking independent judicial review, where the case is currently pending. Qualcomm also filed a motion to stay the execution of the KFTC’s corrective measure pending the court’s review. However, the Seoul High Court rejected Qualcomm’s motion in September 2017. Qualcomm then pursued the stay motion at the Supreme Court, which ultimately denied Qualcomm’s request in November 2017.

The KFTC’s recent notable abuse of dominance case is Siemens. The KFTC imposed corrective measures and an administrative fine of 6.2 billion won on Siemens AG, Siemens Healthcare GmbH, and Siemens Healthineers Korea (collectively Siemens). The KFTC found that Siemens engaged in exclusionary conduct against small to medium-sized companies that newly entered the market in hopes of providing maintenance services on Siemens CT and MRI machines. The KFTC determined that Siemens attempted to monopolise the aftermarket for medical devices and to exclude small to medium-sized maintenance companies by imposing discriminatory conditions (price, function, time between order and delivery) on the use of its service software, which is essential to safety control and maintenance of its medical devices, by reference to whether each hospital (to which Siemens supplied medical devices) employed the services of small to medium-sized maintenance companies.

The KFTC’s most recent abuse of dominance case is Korean Re. The KFTC announced on 17 December 2018 that it had decided to impose fines of 7.6 billion won and corrective orders on Korean Re for abusing its market dominance in the local aviation reinsurance market and driving potential competitors out of the market by striking deals with local non-life insurance companies. Using its dominant position, Korean Re allegedly forced primary insurers to provide insurance rates that it calculated and to use it as their sole reinsurer. Korean Re also allegedly tried to block deals between South Korean non-life insurance companies and foreign reinsurance companies, and excluded competitors from the market by using its dominant position. The KFTC determined that foreign reinsurance companies were forced to go through Korean Re if they wanted to make deals with South Korean insurance companies.

In 2018, the KFTC opened new investigations into alleged abuses of dominance by a number of giant tech companies such as Google Korea, Dolby and Naver. On 26 July 2018, South Korean heavyweight web platform Naver, which boasts a share of more than 70 per cent of South Korea’s internet search portal market, was subjected to an on-site inspection by officials from the KFTC amid allegations that it abused its dominant position in the video content market. In August 2018, the KFTC conducted an extensive, three-week on-site investigation into Google Korea over allegations of abuse of dominance against local game companies. The KFTC probe was focused on whether Google Korea exerted pressure on local game companies to exclusively launch their games on the company’s Google Play platform. The probe is unprecedented as the KFTC typically only conducts on-site probes for about a week or less. US audio technology supplier Dolby Laboratories is also under scrutiny in South Korea amid allegations of antitrust violations. Accusations against Dolby include claims of product bundling and the coercion of licensees into unfair contracts.

Where a clause in a contract involving a dominant company is inconsistent with the legislation, is the clause (or the entire contract) invalidated?

Even if an act by a dominant company constitutes an abusive act of market-dominant position, the clause will not automatically be void or invalidated. The Seoul High Court has held that the validity of the clause must not be judged in an abstract manner based on uniform standards. Instead, the issues including purposes and nature of the applicable laws, the prohibited acts, the extent of violation and the possible confusion in case of invalidation of the clause must first be taken into account, reflecting the concept of justice, fairness or principle of good faith (Seoul High Court decision in case No. 94Ra186, rendered on 12 January 1995).

To what extent is private enforcement possible? Does the legislation provide a basis for a court or other authority to order a dominant firm to grant access, supply goods or services, conclude a contract or invalidate a provision or contract?

A private plaintiff cannot seek an injunctive relief but may only seek monetary damages under the MRFTA. With respect to private enforcement, any person that suffers damages arising out of an abusive act by a dominant firm may be entitled to claim damages pursuant to article 56 of the MRFTA. In this case, however, the KFTC’s finding of a violation would not be a prerequisite to a private plaintiff’s damages action. Of course, in that case, the private plaintiff itself will have to prove first that the accused abused its dominant position.

Do companies harmed by abusive practices have a claim for damages? Who adjudicates claims and how are damages calculated or assessed?

According to article 56 of the MRFTA, for harm caused by antitrust violations including abuse of market dominance, the violator will be responsible for damages. As a general rule, an injured party bears the burden of proof regarding the existence and scope of the damage it allegedly suffered. Where it is extremely difficult for the party injured by antitrust violations to provide sufficient evidence on the amount of damages to be awarded, the court may determine the appropriate amount under its discretion (article 57 of the MRFTA).

In 2013, three civil actions were filed against Microsoft after the KFTC found that Microsoft had engaged in illegally tying. The allegedly injured party, the plaintiff, argued that illegal tying of Microsoft’s operating system and instant messenger effectively shut down the plaintiff’s instant messenger business. However, the Supreme Court dismissed the suit for failure to prove a causal relation between the tying and the alleged injury (Supreme Court decision in case No. 2012Da79446, rendered on 13 February 2013).

To what court may authority decisions finding an abuse be appealed?

The Seoul High Court has jurisdiction over challenges to the KFTC’s administrative decisions (article 55 of the MRFTA). It reviews both the facts and the law. The Supreme Court has jurisdiction to hear appeals of decisions of the Seoul High Court.