The Korea Fair Trade Commission (the "KFTC") established the KFTC Rules on Investigative Procedures ("Investigative Procedure Rules") and amended the KFTC Rules on Internal Commission Meeting Process and Enforcement Procedures ("Enforcement Procedure Rules"). Those Rules came into force on February 4, 2016.
On October 21, 2015, the KFTC announced a comprehensive enforcement-process reform initiative aimed at improving due process for targets of KFTC investigations, which will also improve the transparency, effectiveness and efficiency of the KFTC's enforcement program. Dubbed as "Enforcement Process 3.0," this major reform plan overhauls the KFTC's entire enforcement process, from opening an investigation to conducting an on-site inspection (a so-called dawn raid),and from internal case-management systems to internal recordkeeping requirements. The KFTC initiated a public comment period on its proposed amendment to the Enforcement Procedure Rules and on its proposed adoption of the Investigative Procedure Rules based on "Enforcement Process 3.0" and ultimately adopted these new Rules reflecting comments received during the public comment period.
2. KEY COMPONENTS OF NEW INVESTIGATIVE PROCEDURE RULES
A. The KFTC has clarified the criteria to select on-site inspection targets (Article 5 of Investigative Procedure Rules)
In the past, at times, due to a lack of clear investigation target selection criteria, the KFTC has been criticized or accused of targeting a particular company or favoring a certain company by excluding it from the investigation.
The new Investigative Procedure Rules require that the "Investigation Plan" for an on-site inspection include (i) a full list of potential targets, (ii) criteria for selection of investigation target, (iii) grounds for such criteria, and (iv) selected investigation targets in order to ensure that the investigation targets are selected in accordance with objective and reasonable criteria (Article 5(1)).
B. The KFTC has specified items that must be included in the official notice for the on-site inspection (Article 6 of Investigative Procedure Rules)
In the past, fishing expeditions might have been possible or suspected because there was no requirement to specify the purpose and target of the inquiry in the official notice for the on-site inspection.
The new Investigative Procedure Rules require that the investigator list the following items in the official notice of the inspection that must be delivered before a dawn raid commences: (i) relevant legal provisions and potential violations next to the purpose of the inspection and (ii) the name of the investigation target and place in the column for investigation target (body of Article 6(2)). However, for unfair collaborative acts, completing or describing the potential violations section may be omitted (proviso of Article 6(2)).
C. The KFTC has increased the transparency of the investigative procedures and further guaranteed the defense rights of on-site investigation targets (Articles 13 and 14 of Investigative Procedure Rules)
The KFTC has been criticized for lacking the proper procedural safeguards necessary to guarantee an investigation target's rights in order to prevent coercive investigation, guarantee the assistance of legal counsel, and monitor the investigator's compliance with the relevant rules that were not disclosed to the public.
The new Investigative Procedure Rules guarantee that an investigation target may, request to the KFTC investigator, have its legal counsel present throughout the entire on-site inspection process(body of Article 13(1)). However, if any urgent inspection is required in relation to unfair collaborative acts, if there are concerns that the target may destroy evidence, or if there are factors that may render achieving the purpose of the inspection significantly difficult,1 then participation of legal counsel may be restricted (proviso of Article 13(1) and Article 13(2)).
In addition, the new Investigative Procedure Rules require preparation of an Inspection Process Confirmation form containing (i) time of arrival at the venue; (ii) commencement and closing time of inspection; (iii) issues of concern and matters to be checked; (iv) objections or opinions by the investigation target regarding the content of the Confirmation, which is to be confirmed by a responsible person, employee, or officer of the target (Article 14(1)). Furthermore, according to the Investigative Procedure Rules, the investigator is to deliver a "List of the Materials Collected and Submitted" to the target of the on-site inspection (Article 17(2)).
D. The KFTC has strengthened management and supervision of the case through the head of responsible division (Articles 16 and 17 of Investigative Procedure Rules)
Under the Investigative Procedure Rules, upon closing an on-site inspection, the head of the responsible division will receive complaints from the investigation target and take appropriate remedial action in any subsequent on-site inspections (Article 16(3)). And the investigator has to make daily progress reports to the head of the responsible division (Article 17(1))2 to strengthen effective management and supervision of the on-site inspection.
3. KEY COMPONENTS OF ENFORCEMENT PROCEDURE RULES
A. The KFTC has adopted a provision requiring ex officio investigations and cases triggered by a third-party complaint to be registered (Article 10-3 of the Enforcement Procedure Rules)
Before, for ex officio investigations, if no evidence of a law violation were found after an on-site inspection, the KFTC customarily closed the case without recording the matter in its electronic database system. As a result, the investigation plan, reason for closing the investigation, and any other facts about the relevant target were not recorded or preserved in the KFTC's electronic system, and it posed a risk that the KFTC might conduct repeated investigations into the same case.
The revised Enforcement Procedure Rules contain a newly adopted provision requiring that ex officio investigations and cases triggered by a third-party complaint be registered in the electronic case-management system within a specific period of time (Article 10-3). Accordingly, ex officio investigations or leniency applications must be registered no later than the opening date of the inquiry3 and cases triggered by a third-party complaint, within 10 days.
B. The KFTC has clarified when to assign case numbers and when to report on the commencement of review of the case (Article 11(1) and (3) of the Enforcement Procedure Rules)
The revised Enforcement Procedure Rules require case numbers for ex officio cases be assigned when the cases are registered in the electronic system to strengthen the management and supervision of ex officio cases (Article 11(3)). Until now, reports on the commencement of these cases were required to be made within 30 days from the closing date of the on-site inspection, or completion date of submission of required materials if there was no on-site inspection. Under the revised Rules, reports on the commencement of investigation be made within 30 days from the opening of the inquiry (Article 11(1)).
C. The KFTC has created a provision setting forth enforcement periods (Article 10-3 of the Enforcement Procedure Rules)
The KFTC has been criticized for lacking proper safeguards necessary to monitor whether the KFTC's investigators comply with the proper enforcement periods because the enforcement periods have been contained only in confidential internal guidelines and, accordingly, there were concerns that it would delay resolution of the cases.
The new Enforcement Procedure Rules specify the enforcement periods to be publicly disclosed in order to prevent delay of enforcement actions. Under the new Enforcement Procedure Rules, the KFTC investigators are required to forward matters to the Commission for deliberation within 6 months from the opening of the inquiry (but 9 months for abuse of market dominance and unfair assistance cases, and 13 months for cartel cases) (body of Article 10- 4(1)). However, such enforcement periods may be extended if it is necessary for any unavoidable reason with the approval of the KFTC Secretary General (proviso of Article 10-4(1)).
D. The KFTC has created a provision regarding exclusion, challenge, and recusal of public officers belonging to the Office of Senior Legal Advisor (Article 30-2 of the Enforcement Procedure Rules)
The revised Enforcement Procedure Rules make officers of the Office of Senior Legal Advisor within the KFTC also subject to the existing exclusion, challenge and recusal system in order to ensure the fairness of the assistance they provide for the KFTC's decision-making (Article 30-2).
The KFTC has promoted "Enforcement Process 3.0" as a revolutionary reform initiative to overhaul its enforcement practices of the past 30 years. The adoption of the Investigative Procedure Rules and amendment of the Enforcement Procedure Rules are significant in that they are the KFTC's attempt to offer concrete procedures, safeguards and guidance under the Enforcement Process 3.0. These procedural reform initiatives will strengthen investigation targets' rights and interests and help improve unreasonable practices.
Particularly, these Rules will provide an enhanced framework for the KFTC to conduct its on-site inspections in a more transparent manner, and also help level the playing field when it comes to investigation targets' right to defend themselves in a fair and transparent setting by establishing objective criteria for selection of targets for on-site inspection, guaranteeing the right to participation of legal counsel throughout the entire on-site inspection process and requiring preparation of a confirmation of inspection process form. Furthermore, clearer guidance on enforcement periods and the requirement to register cases in the KFTC's electronic system will promise more transparent and clear enforcement procedures.
1. Factors that may render achieving the purpose of the inspection significantly difficult include cases (i) where it is deemed that an investigation target's request for participation of its legal counsel may delay or interfere with the commencement or progress of the on-site inspection or (ii) where a person intervenes in the examination without the approval of the KFTC investigator or speaks or behaves in an offensive manner (each subparagraph of Article 13(1)).
2. Daily reports on the on-site inspection must contain the name of the case, name of the on-site inspection target and place, commencement and closing date of the inspection, main content of the inspection, issues of concern, name and contact number of the target's staff in charge, name of case examiner.
3. Opening date of inquiry means the earlier of the date on which a request for submission of the materials is first made, the date on which a request for an interested party's attendance is first made, or the first date of on-site inspection.
Originally published in Antitrust News Alert 2016.02
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.