KFTC NEWS
(April 2003, Issued on 4/29/2003)
A. Policy Issues
A­1. Major policy directions of KFTC for 2003
A­2. The 8th International Workshop on Competition Policy
B. Law Enforcement Activities
B­1. Designation of 「Type A」 and 「Type B」 chaebols
B­2. Investigation plan for unfair business practices of companies in the
membership card service industry
B­3. Investigation plan for unfair business practices in the printer repair
parts industry
B-4. Investigation results of unfair business practices of 6 trade
associations
B-5. Investigation plan for unfair business practices of dual purpose
building sellers
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D. Statistics and Miscellaneous
D-1. The number of mergers reported to KFTC in 2002
D-2. The number of complaints filed with KFTC and the results of
KFTC's investigation of the complaints
* This monthly bulletin is intended to provide recent information about KFTC’s policies and
enforcement activities. It is not an official publication of the KFTC and, therefore, does not necessarily
reflect KFTC’s positions; it is, however, based mainly on public releases of the KFTC.
* The sole responsibility for the presentation and content of this bulletin is on Byungbae Kim,
Competition Counselor of the Korean Embassy in the U.S.A. If you have questions or comments about
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A. Policy Issues
A­1. Major policy directions of KFTC for 2003
On April 7, 2003, the chairman of KFTC, Mr. Chul-Kyu Kang, reported to the
President, Mr. Moo-hyun Rho, on the 「Major Policy Directions of KFTC for
2003」. In this report Mr. Kang said that the major objectives of KFTC's
programs and activities would be to enhance transparency in the management of
corporations and to make fair competition take a firm root in the market. Mr.
Kang disclosed several main policy directions (as follows) that KFTC would
pursue in 2003 in order to achieve the objectives.
1) Disclosure of big business groups, or chaebol's detailed ownership structure,
with aims to enhance the understanding of investors and empower the market
monitoring system.
2) Improving the effectiveness of the regulation setting the ceiling on the total
amount of equity investment, with the aim to cure the erosion of the
effectiveness of the investment ceiling system resulting from increased
exceptions that were adopted last year.
3) Finding ways to utilize the holding company, as a possible solution to improve
the corporate governance of chaebols in Korea.
4) Investigating unfair inter-subsidiary transactions of chaebols, in order to force
subsidiaries of chaebols to compete with independent firms, which do not
belong to chaebols, without subsidies from other subsidiaries.
5) Finding ways to curb the dominance of industrial conglomerates in the
financial sector, in order to establish clear distinctions between industrial
capital and financial capital.
6) Strengthening the merger reporting and review system, in order to more
aggressively challenge mergers that are likely to result in monopolies,
oligopolies or other anticompetitive effects on the market.
7) In order to prevent consumer damage arising from cartels authorized by laws,
enacting the 2nd Omnibus Cartel Repeal Act, similar to the 1st Omnibus
Cartel Repeal Act of 1999.
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Mr. Kang again touched upon KFTC's major directions in detail when he met
foreign correspondents on April 11, 2003 in Seoul and again on April 18, 2003,
when he made a speech to business leaders and diplomats upon invitation from
the Korea Chamber of Commerce.
 Mr. Kang's speeches from April 11 and April 18, 2002 are available at
http://www.ftc.go.kr/eng/index.html.
A­2. The 8th International Workshop on competition Policy
The 8th International Workshop on Competition Policy was held in Seoul from the
29th of April to the 2nd of May 2003 and was hosted by the KFTC and the OECD,
under the title of "Competition, the Engine of Sustainable Growth." There were
34 participants from 27 different countries and international organizations such as
the OECD and the WTO.
 Further information about the Workshop is available at http://www.ftc.go.kr/eng/index.html
B. Law Enforcement Activities
B­1. Designation of 「Type A」 and 「Type B」 chaebols
On April 1, 2003, KFTC designated 49 chaebols as 「Type A」 and 17 as 「
Type B」 chaebols. Type A chaebols are subject to the prohibition on debt
guarantees for affiliated companies and Type B’s are subject to the regulation
setting the ceiling on the total amount of equity Investment.
The number of Type A chaebols designated this year is an increase of six from
last year's 43, which includes, among others, Korea Electric Corporation
(KEPCO), Samsung, LG, SK, Hyundai Motors, KT, Hanjin, Lotte and Posco.
The number of Type B chaebols designated this year is a decrease of two from 19
in 2002, which includes, among others, KEPCO, Samsung, LG, SK, Hyundai
Motors, KT, Korea Housing Corporation, Korea Land Corporation and Hyundai
Heavy Industry. The total assets of the 17 Type A chaebols were 508 trillion
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Won (around US$423 billion) as of December 31, 2002 and those of 49 Type B
chaebols were 611 trillion Won (around US$509 billion) as of December 31.
*According to Article 10-2 (Prohibitions on Debt Guarantees for Affiliated Corporations) of the Act, no
corporation (excluding those engaged in financial or insurance businesses) belonging to a Large Business
Group whose total assets amount to more than 2,000 billion won (“Large Business Groups Subject to
Limitations on Debt Guarantees”) shall provide debt guarantees for its domestic affiliated corporations.
However, debt guarantees such as those undertaken in accordance with rationalization plans or
rationalization criteria under the Industrial Development Act or the Tax Exemption and Reduction
Control Act are exempt from the above prohibition. Large Business Groups Subject to Limitations on
Debt Guarantees will be hereinafter referred to as ‘Type A Chaebols’ in this bulletin for convenience.
* According to Article 10(Ceiling on Total Amount of Equity Investment) of the Act, no corporation
belonging to a Large Business Group whose total assets amount to more than 5,000 billion Won (“ Large
Business Groups subject to Ceiling on Total Amount of Equity Investment“) shall acquire or own shares
in other domestic companies whose sum of acquisition value exceeds twenty-five percent (25%) of the
net assets of the corporation (“Investment Ceiling Amount“), with some exceptions. Exercising voting
rights of shares exceeding the Investment Ceiling Amount is prohibited pursuant to the Act. Large
Business Groups Subject to Ceiling on Total Amount of Equity Investment will be hereinafter referred to
as ‘Type B Chaebols’ in this bulletin for convenience.
B­2. Investigation plan for unfair business practices of companies in the
membership card service industry
On April 3 2003, KFTC announced that it would launch an investigation of unfair
business practices of companies in the membership card service industry, such as
mileage card services. Companies in membership card services provide
customers with rights to access services of other companies with which they
have entered into contracts to provide services jointly or interchangeably.
Membership card services are being used by companies in the mobile telephone,
family restaurant, fast food and credit card service industries, which usually
target young customers.
KFTC plans on surveying business practices from April to May against 21
companies and, if necessary, on investigating some companies afterwards.
Main areas for surveying and investigating are unfair clauses in the adhesion
contracts, exclusionary contracts unfair to competitors and deceptive or
fraudulent advertising.
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B­3. Investigation plan for unfair business practices in the printer repair parts
industry
On April 14, 2003, KFTC announced that it would launch an investigation of
unfair business practices of companies that sell repair parts for printers. KFTC
said that as the sales of printers for home customers have increased, consumers'
complaints against those seller companies have also increased. The
investigation will be conducted against Korea HP Co., Korea Epson Co.,
Samsung Electronics Co. and Lotte Canon Co. from April 14th to May 7th this
year.
B-4. Investigation results of unfair business practices of 6 trade associations
On April 18, 2003, KFTC announced that it had imposed cease and desist orders,
administrative fines up to 200 million Won and orders to publish the fact that
they received corrective measures from KFTC against 6 trade associations:
Korea Construction Machinery Association, Korea Electric Engineers
Association, National Freight Trucking Association, Choongnam Province
Freight Trucking Association and two of Inchon Freight Trucking Associations.
It was alleged that in making use of the power that governments relegated to them
to inspect safety requirements of construction machinery and trucks or for
processing registration or other administrative services, they coerced companies
to join their associations, stick to the service fee that the association set or pay
the membership fee.
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B-5. Investigation plan for unfair business practices in dual purpose building
sellers.
On April 18, 2003, KFTC announced that it would launch investigations of unfair
business practices of companies that sell spaces in buildings designed for both
housing and commercial purposes. It is said that as the sales of spaces in those
dual purpose building increased, consumer complaints of unfair practices against
the sellers of those buildings increased accordingly.
Main areas of investigation would be unfair clauses in the adhesion contracts,
deceptive or fraudulent advertising and violations of the Fair Subcontract Act.
KFTC's investigation will last from April 28th to May 17th against 18 Companies
selling spaces of dual purpose buildings and the 15 construction companies
associated with those buildings.
B-6. Investigation results of the international cartel of 6 vitamin companies
On April 18, 2003, KFTC announced that it had imposed cease and desist orders
and a total amount of 3,916 million Won (US$3,118 thousand) as administrative
fines on 6 vitamin manufacturing companies for their participation in the
international cartel.
The name of companies and fines imposed to them are as follows:
F.Hoffmann La-Roche Ltd. (Switzerland): 1,958 million Won (USD 1,559
thousand)
BASF A.G. (Germany): 1,450 million Won (USD 1,155 thousand)
Aventis S.A. (France, formerly Rhone-Poulenc S.A.): 245 million Won (USD
195 thousand)
Eisai Co., Ltd. (Japan): 184 million Won (USD 146 thousand)
Daiichi Pharmaceutical Co., Ltd.(Japan): 74 million Won (USD 59 thousand)
Solvay Pharmaceuticals B.V. (the Netherlands): 5 million Won (USD 4
thousand)
It was alleged that these six companies, accounting for 90% market share in the
world bulk vitamin market, agreed to allocate the sales volume and coordinate
the price of bulk vitamins such as vitamin A, E, B5, D3, and Beta Carotene in
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the global market, and that their cartel brought about the anticompetitive effect
of higher prices for vitamins imported into the Korean market.
This is the second time that KFTC has applied the Act to anticompetitive
practices of foreign businesses overseas. In March 2002, KFTC applied the Act
for the first time to the international cartel of graphite electrodes.
D. Statistics and Miscellaneous
D-.1 The number of mergers reported to KFTC in 2002
On April 15, 2003, KFTC released the statistics of mergers reported to KFTC in
2002. According to the KFTC's statistics, the number of total merges reported in
2002 decreased to 602 cases, a decrease of 6.5% from 644 in the previous year.
The aggregated size of those 602 mergers amounted to 15.5 trillion Won (about
US $12.8 billion), an increase of 13.3% from 2001.
Among the 602 mergers in 2002, horizontal mergers were 151(92 in 2001),
vertical 65(the same in 2001) and conglomerate were 386(487 in 2001).
Mergers reported in manufacturing industries increased to 213 while it was 198 in
2001, and those in the service sector were 389 down in 2002 from 455 in 2001.
D-2. The number of complaints filed to KFTC and the results of KFTC's
investigation on the complaints
On April 16, 2003, KFTC published statistics about complaints that were filed
with KFTC and the results of KFTC's investigation of the complaints. The total
number of complaints filed with KFTC was 3296 in 2002. After investigating
those complaints, KFTC imposed corrective measures in 2635 cases, including
11 cases of filing complaints with the Prosecutor-General's Office for criminal
penalties, 496 cease and desist orders and 2013 administrative warnings. The
number of corrective measures that KFTC made in 2001 was 3934, including
3476 cases involving administrative warnings.
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