Must-Read if You Want to Avoid Penalties and Administrative Surcharges for Violations of the Fair Trade Act
Why Do We Become Parties to Violations of the Fair Trade Act?
Most violations of the Fair Trade Act begin with transactional structures that have been repeated as customary practice.
Conditions that have continued for years without question often come to light unchanged during investigations.
Many companies assume that the mere existence of contractual provisions shields them from legal liability.
However, the Fair Trade Act assesses illegality based not on the formal agreement of the contract, but on the substantive nature of the transaction and the imbalance of bargaining power between the parties.
In particular, where the counterparty is in a position of economic dependence and cannot realistically refuse the terms, the conduct may be deemed unlawful regardless of the business operator’s subjective intent.
In such cases, the corporation itself and the representative who holds actual decision-making authority may ultimately become the responsible parties under the Fair Trade Act.
Key Transaction Structures Targeted by the Korea Fair Trade Commission
Under the Fair Trade Act, abuse of superior bargaining position may arise where a business operator is recognized as having a superior position in trade vis-à-vis the counterparty
(Article 45(1)(6) of the Monopoly Regulation and Fair Trade Act).
If direct or indirect control over pricing, transaction terms, or business operations exists, the situation has already entered a risk zone.
Using a superior bargaining position to impose unfair disadvantages on a counterparty—such as by threatening contract termination or suspension of transactions—may be regulated as abuse of superior bargaining position.
In particular, discrepancies between internal standards or manuals and actual operational practices themselves can serve as grounds for determining a violation of the Fair Trade Act.
Accordingly, the Korea Fair Trade Commission evaluates not only formal documents such as contracts, but also actual trading practices and operational realities in a comprehensive manner.
Structures that appeared to be mutually agreed upon on the surface are often interpreted as unilateral control during the course of an investigation.
From This Stage, Investigation and Sanction Risks Become Real
Fair Trade Act cases may begin through complaints filed by counterparties or through ex officio investigations initiated by the Korea Fair Trade Commission.
Once a complaint is received or an ex officio investigation is launched, the Commission may examine transaction records and related materials concerning the alleged violation.
For this reason, the response strategy at the initial stage is a decisive factor in determining the outcome.
Inaccurate explanations during document submissions, poor internal document management, or inconsistent statements can become fatal grounds for adverse findings.
If the degree of violation is not minor, corrective measures and administrative surcharges may be imposed. Where the violation is objectively clear and serious enough to substantially harm the competitive order, criminal referral may follow.
When criminal punishment is imposed for violations of the Fair Trade Act, the dual liability provisions may apply, resulting in penalties not only for the corporation but also for its representative officers. This is therefore a matter that must never be taken lightly.
How Decent Law Firm Provides Assistance
Decent Law Firm works in collaboration with corporate law specialists to practically assess and respond to fair trade risks arising in the course of corporate operations.
Rather than limiting our review to formal contractual terms, we focus on actual transaction structures and operational realities, providing assistance in the following ways:
-
Preemptive risk assessments of transaction structures, contracts, and operational practices
-
Clarification of criteria for potential Fair Trade Act violations and advisory on structural improvements
-
Development of response and substantiation strategies for KFTC investigations
-
Practical, industry- and company-size–specific compliance support
Fair Trade Act penalties are an area where it is already too late to begin considering solutions after issues have arisen.
Assessing whether current transaction practices may fall within the scope of regulation is, in itself, the most realistic and effective form of response.
