Recent Activities of the KFTC

1. Recent Activities of the KFTC Korea Fair Trade Commission 2007.10 Sang-Seop NOH

2. Contents • Framework of Competition Policy • What Is Competition Advocacy? • Why Is It Important? • Recent Activities of the KFTC

3. Framework of Competition Policy • What is competition policy? “Policies aiming at maintaining the best functioning of market economy by securing competitive market structure and free & fair corporate activities” • Maximum market performance • creative business activities • consumer protection • balanced development of the • national economy Competitive structure Free and fair activities

4. Competition laws mainly consist of the substantive regulations for improving market structure and behaviors. • Regulations promoting competitive market structure • M&A control • Excessive concentration of economic power, etc. • Monitoring behaviors of the market players • Ban on abuse of market dominance • Cartels and behaviors of trade associations • Ban on unfair business practices

5. Making a good ‘environment for law enforcement’ is even more important than ‘competition law enforcement activities.’ • This drives the competition authorities to carry out competition advocacy activities.

6. What Is Competition Advocacy? • “All activities of the competition authorities which influence government’s economic and regulatory policies in order to promote competitive industry structure, corporate behavior and better market performance.” • Government intervention is more often found in transitional and developing economies than in developed economies. • Publicity activities are included creating a popular base to support competition policy. • E.g) remove the regulation on supervision in the securities business, which allowed securities companies to collectively decide trading fees

7. Why Is Competition Advocacy Important? • There exist various organizations pursuing diverse purposes related to some specific areas. • Doing diverse activities for each body’s policy goals. • Difficult to enforce competition laws against all governmental activities. • Activities exempted from the MRFTA • Non-commercial activities or activities done by non-enterprises • Legitimate actions taken in accordance with other Acts or Regulations • Legitimate Exercise of intellectual property rights

8. When anti-competitive policies and regulations are in existent, it is hard to expect the competition authority to secure desirable market performance only with its law enforcements. • E. g.) • When a monopoly right is given to a firm by a law • When a monopoly is permitted as a result of giving license • When a price cartel is guaranteed by a law

9. Anti-competitive institutions and practices are often tacitly implemented in the form of an administrative guidance by the related ministries, while some are clearly stated in laws. • E.g.) A related ministry’s intervention or mediation in business activities due to excessive competition

10. Competition advocacy activities are essential part of the competition policy. • The benefit of once-and-for-all system improvement by an advocacy activity is equal to the value of corrective orders done by several times • Each party concerned should take the importance of “competition” into account: for policy makers in their policymaking, for firms in their business activities, and the general public in checking and monitoring.

11. The current worldwide trends of economic reforms carried out by means of privatization, regulatory reform, and trade liberalization provide a good cause for the competition authority not to content with its traditional enforcement activities. • Issues for furthering economic and trade liberalization are under active discussion by international organizations such as OECD and WTO. • Making a multilateral competition framework has also became a popular agenda.

12. Recent Activities of the KFTC • Abuse of Market Dominance • 18 cable system operators(July, 2007) • Unilateral termination of group contracts and changing popular channels from low-cost service to premium service • Surcharge: 216 million Won($230,000) • Hyundai Motor Company(Jan, 2007) • Compelling its retail store to meet selling quota • Restricting its sales agents from relocating or expanding their stores • Surcharge: 23billion Won($24million)

13. Cartel Case • Cartel is the Supreme Evil in the market economy, which undermines the market price system and harms consumer welfare • 4 Oil Refineries collusion • Increasing the price of gasoline, diesel by collusion • Surcharge: 52.6billion Won($56million) • 4 Ice cream makers for price fixing • Increasing the retail prices of ice-cream • Surcharge: 4.6 billion Won($4.9 million)

14. Merger Case • DCC’s Acquisition of CCK • DCC acquire 100% share of CCC • M/S increases by 64.2% • No potential for an import increase in the future • Eland Retail’s acquisition of Carrefour Korea • ER acquire 50% stake of CK • Relevant market: discount store market • Local market: within the radius of 5 km • Fewer discount stores, lower price competition

15. Money Lending Business Case • Conducted on site investigations to detect misleading advertisements by 20 money lenders • Fair Labeling and Advertising Act • Unfair and deceptive advertising

16. CCMS(Customer Complaints Management System) • Introduced in 2005 • Successful settlement of the voluntary damage redress system • Rewards for exemplary companies: easing of regulations and issuance of certification marks to more than 50 companies

17. Competition Policy is no longer “luxury” of developed countries but “necessity” of all countries longing for market economy – J. Stiglitz