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Korea Fair Trade Commission(KFTC)
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Competition advocacy

Concepts

This means various policies and measures for inducing and promoting free-market competition by analyzing factors in the market structure that restrict competition

  • There are limitations on the establishment of the fair-market economic system merely by enforcing ex post facto statutes against anti-competitive business practices.
  • It is important to play a role in pro-actively creating a competition-friendly environment in the market. Such role is referred to as the function of competition advocacy.
  • Reforming the Government’s competition-restricting regulations (improvement of statutes), the improvement of the monopolistic or oligopolistic market structures, etc. can be enumerated as exemplary measures.

Major measures

Improvement of competition-restricting statutes

  • The ground for the improvement of competition-restricting regulations is provided for by Article 120 of the Monopoly Regulation and Fair Trade Act, which requires the head of a related central administrative agency to consult with the KFTC. when he/she intends to enact or amend an Act or subordinate statute creating limitations on competition.
  • Measures to improve competition-restricting statutes are divided broadly into measures for hindering the formulation or reinforcement of competition-restricting regulations and measures for reforming existing competition-restricting regulations.

Measures for hindering the formulation or reinforcement of competition-restricting regulations

  • In order to hinder the formulation or reinforcement of competition-restricting regulations, any ministry or agency that intends to establish new regulation shall notify the KFTC thereof, and if the KFTC finds that such regulation restricts competition, we shall present our opinion to amend the regulation at the stage of consultations on legislation and shall reach an agreement thereon with the relevant ministry or agency.
  • The Chairperson or Vice Chairperson of the KFTC shall attend meetings of the Regulatory Reform Committee and the State Council and Vice Ministers’ meetings to ensure that the opinions presented at the stage of consultations on legislation have been reflected in legislation as agreed.

    Outcomes of major measures

    As the awareness and consensus of the preliminary consultation system for competition-restricting legislation gradually spread throughout the Government, an average of 60 requests for consultations have been filed each year since 2004, out of which approximately 40 opinions have been presented thereon. For reference, the ratio of opinions reflected in relevant cases to opinions presented reaches an average of 80% and tends to be on a gradual rise.

Measures for reforming existing competition-restricting regulations

As measures to reform existing competition-restricting regulations, the KFTC has collected opinions from inside and outside on all systems for regulation on particular industries, and as a result thereof, has found that regulations impose excessive limitations on market competition, and consulted with related ministries and agencies on plans for improvement.

Outcomes of major measures

The Government found competition-restricting regulations in major industries, such as alcoholic beverages and oil refinery, and made drastic improvements thereto from 1988 until the end of 1990s and enacted the En Bloc Clearance of Cartels Act as part of the reform of the economic structure after the foreign exchange crisis at the end of 1997 to abolish 20 statutory cartels existing under 19 Acts, such as a cartel for attorney’s fees. In 1997, the Economic Regulatory Reform Committee was established to perform the function of administering the regulatory reforms in the economic sector. Further, the Task Force for Reformation of Competition-restricting Regulations was established in 2000 as an internal organization of the KFTC and has been operated ever since to continuously find and improve competition-restricting regulations under existing statutes. In 2004, the KFTC agreed with related ministries and agencies to abolish or improve 56 regulations, among 152 competition-restricting regulations examined and reported by the Korea Society or Regulatory Studies under Acts and subordinate statutes, and reviewed competition-restricting rules and public notifications in 2005, other than Acts and subordinate statutes, and agreed with related ministries and agencies to amend 51 regulations. In 2008, the KFTC made agreements to amend competition-restricting regulations in sectors subject to a number of government regulations, such as aviation, broadcasting, telecommunications, and finance, and amended 33 competition-restricting regulations under municipal ordinances and rules of local governments. Since 2009, the KFTC has made four major improvements (2008~2012), jointly with the Presidential Council on National Competitiveness, to 82 regulations in total in sectors in which monopoly has long persisted or in sectors closely related to citizens’ livelihood and in sectors where it was necessary to alleviate the burden on small and medium enterprises or consumers to contribute to the revitalization of economies by promoting entry of new businesses into the market, and has promoted improvements to regulations closely related to livelihood, which directly affect business activities, jointly with the Office for Government Policy Coordination from 2013 onwards in lieu of the Presidential Council on National Competitiveness, which was abolished this year. Furthermore, the KFTC made agreements with primary local governments in 2009 to amend 847 competition-restricting ordinances and rules in order to diffuse the principle of competition to regional markets. The KFTC also promoted improvements to 1209 cases of regulations in total until the end of 2012.

Measures for improvement of monopolistic or oligopolistic market structure

  • In order to make drastic improvements to the monopolistic or oligopolistic market structure, the KFTC has performed tasks for improving the Government’s competition-restricting regulations, not only in unfair trade practices in monopolistic or oligopolistic industries but also in various limitations on market entry, by comprehensively surveying and analyzing markets in which monopoly or oligopoly has long existed.
  • Although measures for improving regulations on monopoly or oligopoly have been implemented since the Monopoly Regulation and Fair Trade Act entered into force in 1981 in the way of taking ex post facto corrective measures against market-dominant entities’ abusive practices, there were still limitations in systematically analyzing the monopolistic or oligopolistic market structure and fundamentally improving causes of monopoly or oligopoly when merely ex post facto corrective measures were taken against abusive practices case by case.
  • Hence, the legal ground was established in 1996 to enable the implementation of measures for improving the monopolistic or oligopolistic market structure, including the creation of competition in markets in which the monopolistic or oligopolistic market structure has long been firmly established (Article 4 of the Monopoly Regulation and Fair Trade Act).

    Outcomes of major measures

    As the legal ground (Article 4 of the aforesaid Act) was established in 1996 to enable the formulation and implementation of measures to improve the monopolistic or oligopolistic market, 26 items were designated as subject to priority improvement and measures to improve the monopolistic or oligopolistic market structure have been implemented in full force. Since 1997, three to four items have been selected each year, among items subject to priority improvement, and measures to improve the market structure for such items have been implemented. In 2001, measures to improve the monopolistic or oligopolistic market structure were replaced by measures to improve the market for each industry, which were implemented for 39 types of businesses in total until 2005 since then, and a market analysis report on two to three business sectors selected each year has been published since 2008.

  • Measures to improve the monopolistic or oligopolistic market structure have been implemented by selecting markets for the supply or demand of commodities or services for which the monopolistic or oligopolistic market structure has existed for a long time.
  • With respect to items for which the monopolistic or oligopolistic market structure has long existed, surveys and analyses have been conducted on the general current status of the relevant industries, the market structure and competition-restricting practices, the Government’s regulations, etc. from the stage of supply of raw materials to the final stage of distribution.
  • In addition, market structures, including market concentration ratios in industries throughout the Republic of Korea, have been surveyed and published in order to select commodities and services for which the monopolistic or oligopolistic market structure has long existed.
  • The KFTC has requested related ministries and agencies to improve competition-restricting regulations, such as regulations on market entry into the market, regulations on business activities, and regulations on export and import, according to the findings from its surveys and analyses.
  • Furthermore, the KFTC also investigates into competition-restricting practices, such as limitations on entry of competitors into the market and interference with business activities, and takes corrective measures against such practices.