Major retailers that unfairly shift costs to suppliers and commit serious legal violations will face fines of up to double the amount of the violation.
The Fair Trade Commission announced on August 27 that it will publicly announce a revised enforcement decree for the Large-Scale Distribution Industry Act by September 6. A revised guideline for imposing fines on violators of the Large-Scale Distribution Industry Act will also be announced by September 16.
The revision aims to expand the proportional imposition of fines based on the scale of the violation. Under the current system, fines are determined by multiplying the 'violation amount'—the unjust profit gained by large retailers or the damage suffered by suppliers—by a set rate.
However, if it is difficult to calculate the violation amount, a fixed fine of up to 50 million won will be imposed regardless of the scale of the violation. An analysis of the past 10 years of decisions under the Large-Scale Distribution Industry Act by the Fair Trade Commission revealed that fixed fines were applied in a significant number of cases.
Moving forward, if the violation amount can be calculated, fines will be imposed based on that amount as before. However, if calculation is difficult, a proportional fine will be recalculated based on the related supplier payments or rent. A fixed fine of up to 50 million won will only be imposed when it is impossible to assess both the violation amount and related supplier payments.
The rate for imposing fines will also increase. The rate for very serious violations will rise from the current 140% to between 180% and 200%. For serious violations, the rate will increase from 100% to between 150% and 180%.
For violations deemed less serious, the current single rate of 60% will be segmented based on severity, ranging from 80% to 150%. A new separate rate of 1% to 10% will also be established for calculating fines based on related supplier payments, with 9% to 10% applied for very serious violations.
Sanctions for habitual violations will also be strengthened. Currently, a company must have violated the law more than twice in the past three years to incur a fine increase of up to 20%. The revision extends the assessment period to five years and allows for a maximum increase of 50% with just one prior violation. If a company has violated the law four or more times and has a cumulative score of 7 points or more, the increase can reach up to 100%.
Criteria for reducing fines will become stricter. Currently, a company can receive a reduction of up to 20% for cooperating with the Fair Trade Commission's investigation and deliberation, with 10% for each stage. In the future, cooperation throughout all stages will be required for a maximum reduction of 10%. The reduction rate for voluntary corrections will also decrease from a maximum of 50% to 10%.
New criteria for imposing fines on companies that obstruct investigations will also be established in the enforcement decree. The current decree only addresses fines for refusing, obstructing, or evading on-site investigations, leading to criticism that it differs from the regulatory framework of other Fair Trade Commission laws.
The Fair Trade Commission plans to gather opinions from stakeholders and relevant ministries during the legislative and administrative announcement period and aims to finalize the revisions to the enforcement decree and guidelines by the end of the year.
* This article has been translated by AI.
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