Tuesday, April 30, 2013

Recent Competition Law Enforcement in Korea: Arbitrary and Capricious

Posted by D. Daniel Sokol

Nam Woo Kim, LG Electronics describes Recent Competition Law Enforcement in Korea: Arbitrary and Capricious.

ABSTRACT: The Korean Competition Law, 'Monopoly Regulation and Fair Trade Act (MRFTA),' has a similar provision, Sectio 23 to Section 5 of the Federal Trade Commission Act (FTC). Precisely speaking, Section 23 is close to Section 5 of the FTC Act before the 1980s, which was protecting competitors, not competiton. Section 23 of the MRFTA broadly restricts business conduct under the principle of unfairness. In a recent case, the Korean Fair Trade Commission (KFTC) banned vertical agreement of KookSoonDang (KSD), a Korean traditional liquor company, to split the market between its distributors. The KFTC, without sophisticated economic analysis on the interbrand competiton or horizontal market, ruled that vertical agreement to carving out the market substantially restrain the intrabrand competition. The decision demonstrated that intracompetition should be envigorated.

Contrastingly, the KFTC has implemented so-called distance limit on the franchise contracts. The KFTC alleged that the frachisors had taken advantage of their power so as to hatch too many franchisee stores without considering proper profit level of the franchisees. Therefore, cutthroating intra-brand competition has been resulted so that mitigation tool, distance limit, is needed to lessen intrabrand competition.

The KFTC's policies are arbitrary and even capricious. Competition law and policy, due to broad wording, need consistent enforcement principles to save compliance cost for market players.


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