The Democratic Party of Korea and the government have agreed to let regulators revoke registrations or licenses, or suspend business operations, for companies caught colluding twice or more within five years, and set the number of industries covered at 17. They also plan to create a legal basis for ordering companies to reset prices inflated by collusion and to extend the maximum statute of limitations for cartel sanctions to 15 years from 12. The aim is to stop long-running, repeated collusion in sectors close to daily life from distorting prices and adding to household costs.
The party and the government held a policy consultation meeting on legislation to eradicate repeat collusion at the National Assembly members' office building on the 28th and discussed the measures. They agreed to pursue five legislative tasks, including revisions to the Fair Trade Act and to 17 individual laws covering safety, energy, transport and environment.
The centerpiece is a broader use of registration revocation and business suspension against repeat offenders. The two sides will define repeat collusion under the Fair Trade Act as "colluding twice or more within five years" and give the Fair Trade Commission the authority to ask relevant ministries to revoke registrations or suspend operations once it identifies such a company. The ministries will add provisions to individual laws allowing them to impose the actual penalties.
Some laws already carry penalties for repeat collusion, including the Framework Act on the Construction Industry and the Licensed Real Estate Agents Act. A construction company that repeatedly engages in price fixing, restrictions on transactions or bid rigging and is fined twice or more within nine years can have its construction business registration canceled. Licensed real estate agents who repeatedly commit acts banned under the Fair Trade Act and receive corrective orders or fines twice or more within two years can have their registration revoked by the registering authority.
The party and the government decided to widen the scope to 17 industries where collusion is frequent and closely tied to daily life. Registration revocation provisions will be added to four laws, including the Fire-Fighting System Installation Business Act, the Electrical Construction Business Act and the Electric Technology Management Act, while business suspension provisions will be added to 13 laws, including the Petroleum Business Act, the Passenger Transport Service Act, the Trucking Transport Business Act, the Measurement Act, the Environmental Testing and Inspection Act, the Sewerage Act and the Wastes Control Act. Individual laws will be allowed to tighten or loosen the repeat-collusion threshold to reflect conditions in each industry.
"Companies should compete on price and service, and the benefits of that competition should go to consumers, but collusion means refusing to compete," said Min Byoung-dug, senior deputy chief of the Democratic Party's policy committee. "Because it ultimately hurts people's livelihoods through prices and services, we will push to eradicate repeat collusion."
The statute of limitations will also be extended to improve the chances of detection. For violations discovered before an investigation begins, the period will run 10 years from the end of the conduct, up from seven. Combined with the current five-year period that runs from the start of an investigation, the maximum stretches to 15 years from 12. The change reflects the secretive, long-running nature of cartels.
Monitoring of bid rigging in education will be strengthened as well. Central government bodies, local governments and state-run institutions currently submit public bidding data to the Fair Trade Commission's Bid Rigging Indicator Analysis System, or BRIAS, but education offices are exempt. The two sides will revise the Fair Trade Act to name education offices among the bodies required to submit bidding information and cooperate with the system. The step follows a series of bid-rigging cases in education, involving school uniforms and tablet computers for classroom use.
The plan also creates a legal basis for a "price redetermination order" that would directly correct prices distorted by collusion. It addresses the problem that inflated prices can remain in place even after companies that raised them through collusion are caught and penalized. "You cannot raise prices through collusion and then keep them there," Min said. "Consumers can escape price increases caused by collusion only if such an order is possible."
Leniency for companies that report their own cartels will be narrowed. The Fair Trade Act will be amended so that self-reporting companies can still have fines reduced but cannot be exempted from corrective measures such as a price redetermination order.
"Long-running, repeated collusion in areas close to people's lives not only distorts prices and adds to household burdens but also leads companies to look for chances to exploit and cheat rather than compete productively through technology development and new businesses, which risks damaging the health of the national economy and its growth momentum," said Joo Byung-ki, chairman of the Fair Trade Commission. "Along with strict enforcement, we need far-reaching institutional reform to root out repeated, chronic collusion that persists as if it were common practice."
The party and the government plan to submit the bills soon and begin full legislative discussions after the parliamentary audit of government agencies. "This is an important matter directly tied to consumers' livelihoods and welfare, so we will work to handle it quickly," said Rep. Park Sang-hyuk of the Democratic Party.
"We need to send the market a clear warning that the cost of collusion outweighs the gains," said Kwon Chil-seung, chairman of the Democratic Party's policy committee. "We must put in place institutional measures so that habitual cartel operators who destroy market trust and damage the national economy are pushed out of the market."
