The Korea Fair Trade Commission (the "KFTC"), the Korean antitrust enforcer, has proposed revisions to guidelines on its cartel leniency program (the "Guidelines"). The proposed revisions to the Guidelines (the "Proposed Revisions") include (i) eliminating the KFTC Secretariat's practice of issuing preliminary or provisional markers for leniency standing, (ii) clarifying the definition of "repeat offender," (iii) introducing an "advisory" provision stating that a leniency applicant, after being granted an exemption from or reduction of sanctions under the leniency program, may not deny facts admitted in its leniency application, (iv) relaxing the evidentiary burden borne by leniency applicants, and (v) clarifying restrictions on second leniency applicants. After a 20-day public consultation period (Nov. 19, 2014 – Dec. 9, 2014), the KFTC will undertake the actual revisions, which will in all likelihood closely mirror the Proposed Revisions.
I. Overview of the Proposed Revisions
A. Elimination of Preliminary Markers for Leniency Standing
At present, the Secretariat of the KFTC, i.e., the investigative body of the KFTC, issues at its discretion preliminary or provisional markers for leniency standing before the Commissioners of the KFTC, i.e., the deliberative body of the KFTC, hear the case at issue. In principle, within 15 days after receipt of a leniency application, the Secretariat issues a preliminary marker for that leniency applicant. Thereafter, the preliminary marker is reviewed, and is usually confirmed, by the Commissioners after deliberations.
In recent years, this practice of issuing preliminary markers has been the subject of some controversy. First, the KFTC has noted that some leniency applicants do not provide full cooperation with the KFTC after receiving their preliminary markers. Second, in a 2012 decision, the Korean Supreme Court held that the Secretariat's decision not to issue a preliminary marker constitutes an administrative decision that may be appealed to the courts (the "plate glass cartel case," Supreme Court Decision No. 2010Du3541, decided Sept. 28, 2012). Under this Supreme Court Decision, a leniency applicant denied a preliminary marker by the Secretariat may now file an interlocutory appeal to the courts even before the case is heard by the Commissioners. This possibility has the risk of prolonging a cartel case before the KFTC, which functions as the trial court for all public antitrust enforcement cases in Korea. In light of these considerations, under the Proposed Revisions, the Secretariat will no longer issue preliminary markers; instead, the Commissioners will determine leniency standing during their deliberations.
B. Clarification of Definition of "Repeat Offender"
By statute, a "repeat offender" is not eligible for the KFTC's cartel leniency program. Under Article 6-3(1) of the Guidelines, "repeat offender" is defined as a business that, within five years after being assessed an administrative fine and corrective measures for a violation of Article 19(1)1 [of the Korean antitrust statute, i.e., the provision prohibiting cartel activities], engages in cartel activities again in violation of the "corrective measures at issue." Because of the ambiguity of the term "corrective measures at issue," commentators have raised concern that this provision of the Guidelines is subject to arbitrary enforcement by the KFTC. Hence, under the Proposed Revisions, Article 6-3(1) of the Guidelines is deleted.
On the other hand, the Proposed Revisions retain Article 6-3(2) of the Guidelines, which defines "repeat offender" as a business that engages in cartel activities again within five years of a KFTC decision granting leniency benefits to that business. At the same time, the Proposed Revisions explicitly exclude from the Article 6-3(2) definition of "repeat offender" any business that engages in cartel activities again five or more years after the termination of its involvement in a prior cartel. This proviso is aimed at extending leniency eligibility to businesses that will otherwise be ineligible for leniency because they engaged in cartel activities again within five years of a KFTC decision granting them leniency benefits, even though their involvement in the prior cartel ended five or more years before their involvement in the later cartel.
C. Introduction of "Advisory" Provision Concerning Denial of Facts Admitted in Leniency Application
Recently, there have been instances where leniency applicants admit certain facts in their leniency applications only to deny them in subsequent appeals to courts. To address this problem, the Proposed Revisions introduce a provision explicitly stating that a leniency applicant may not deny facts admitted in its leniency application once it receives leniency benefits based on the admitted facts.
D. Relaxing Evidentiary Burden Borne by Leniency Applicants
Under the Guidelines, a leniency applicant bears a somewhat rigorous evidentiary burden. Specifically, to receive leniency benefits, a leniency applicant must introduce the following evidence ("Required Evidence"): (i) direct evidence of the relevant facts such as written agreements, meeting minutes, and internal reports ("Direct Evidence"), or (ii) specific testimonial evidence such as employee declarations ("Testimonial Evidence") along with additional, specific evidence of the relevant facts such as documents other than direct evidence, objects, electronic files, and communication data ("Additional Evidence"). In a 2013 decision, however, the Korean Supreme Court essentially held that Testimonial Evidence by itself may constitute Required Evidence (the "Daegu housing bid-rigging case," Supreme Court Decision No. 2012Du8724, decided May 23, 2013). Pursuant to this Supreme Court decision, the Proposed Revisions define Required Evidence as follows: (i) Direct Evidence, (ii) Testimonial Evidence along with Additional Evidence, or (iii) any other evidence that sufficiently proves the relevant facts, such as (additional) declarations.
E. Clarification of Restrictions on Second Leniency Applicants
By statute, a business is ineligible for leniency benefits if it was a party to (i) a two-party cartel for which the other party already applied for leniency, or (ii) a cartel for which (x) another member of the cartel filed the first leniency application for that cartel or otherwise began to cooperate with the KFTC as the first such cooperating party, and (y) two or more years have passed since the foregoing member of the cartel filed for leniency or otherwise began to cooperate with the KFTC. The Proposed Revisions clarify this statutory provision in two ways. First, in determining whether a business constitutes a party to a two-party cartel (i.e., condition (i) above), the operative date is the termination date of the cartel at issue. Second, the operative date under condition (ii)(x) above is the receipt date of the leniency/cooperation filing.
The Proposed Revisions are not very controversial and therefore are likely to be adopted by the KFTC after the public consultation period without meaningful changes. Thus, companies engaged in business in Korea should pay careful attention to the Proposed Revisions so that they can determine their eligibility for the KFTC s leniency program. This is particularly the case since the Proposed Revisions seek to restrict leniency eligibility and standing in two ways. First, although the proposed elimination of preliminary or provisional markers for leniency standing provides greater transparency to the process of determining leniency standing, it also requires a greater degree of cooperation by leniency applicants throughout the leniency process. Second, the provision concerning denial of facts admitted in leniency application - while only "advisory" in nature - signals the KFTC s intention to pursue measures with which to bind leniency applicants to their factual admissions.