regional antitrust workshop

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Regional Antitrust Workshop

Recent Activities of the KFTC

Recent Activities of the KFTC

Oct 12, 2006

KFTC, Competition Policy Team Team Manager, Kim Chie-Gul

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ContentsⅠ. A Brief Introduction to the Recent Change of the KFTC

Ⅱ. Policy and Performance on Promoting Competition

1. Banning Abuse of Market Dominance

2. Regulating M&A with Antitrust Competitive Effects

3. Banning Cartels

4. Applying Competition Principles in Government Sector

Ⅲ. Restraining Concentration of Economic Power

- A Chaebul Policy

Ⅳ. Closing

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The previous hierarchical, multi-tiered structure ⇒ horizontal structure of teams under headquarters

-The KFTC focuses its core competency mostly on facilitating voluntary regulations by market forces while reducing its tasks in regulations against companies.

An organizational restructuring on 19th Dec, 2005

Ⅰ. A Brief Introduction to the Recent Change of the

KFTC


KFTC

Setting up Economic Analysis team, Emerging competition Issue Team, Litigation Team

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New chairman’s Assumption of Office(16th

Mar.2006) : Strengthening Competition Law Enforcement New chairman, Mr. Kwon, a former

Professor, is a great master of the competition law- strengthening the competition law enforcement as an essential role of competition authority Setting 5-main tasks of the KFTC’s policy enforcement

1.Refining KFTC’s competition laws and policies

2. Strengthen competition law enforcement

3. Spreading the competition principles 4.Promoting cooperation between large companies and SMEs5. Realizing consumer sovereignty


KFTC


KFTC

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Ⅱ. Policy and Performance on Promoting Competition Ⅱ. Policy and Performance on Promoting Competition

Banning Abuse of Market Dominance

With the system called Presumption of Market Dominance, businesses’ market dominance was reviewed only when they got involved in dominance abuse cases.

- not much has been achieved so far in correcting abuse of market dominance

†Action against abuses of Dominant Position from 2000 to 2005 : 2 cases

The KFTC will strengthen law enforcement against abuse of dominance - by Continuously-monitoring the companies in industries where monopoly or oligopoly has remained for a long time

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Banning Abuse of Market Dominance

: recent Microsoft’s bundling case

The KFTC issued a decision against the abuse of market dominance by Microsoft corporation and MS Korea.

- Order : to unbundle their tied products and to install competitors products

- Surcharge : 33 billion won (USD 31million)

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Regulating M&A with Antitrust Competitive Effects

KFTC is reviewing about 600~700 M&A cases a year.- in 2005 : reviewing 685 cases, correction order : 3 casesThe parties of M&A between foreign businesses are required to notify the KFTC of M&A if it affects Korean market - notification case : 13(’03)→58(’04)→72(’05)

Preventing the formation of monopolies by reviewing M&As-review : 1) definition of a relevant market 2) potential adverse competitive effects (market share, concentration ratio, etc.) 3) comparison with 2) and efficiencies

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Regulating M&A with Antitrust Competitive Effects : recent cases to be recognized of competition restrictiveness

Case ( 2005 )

KFTC took corrective measures for the first time in the case of conglomerate M&A probability restraining a channel of distribution

Hite+Jinro

(*beer + distilled liquor company)

Case ( 2006 )

Eland Retail + CarrefourE-mart+ Walmart

KFTC ordered to sell some stores in the area with competition restrictiveness definition of relevant market as a regional one

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Banning Cartels Cartel is the Supreme Evil in the market economy-Cartel undermines the market price system and gives harm to consumer welfareKFTC, like other competition authorities around the world is putting its priority on fighting against cartel†The ceiling on surcharges levied on cartels increased from 5% of related sales to 10%.

†The KFTC set up Cartel Bureau which has 3 teams on 19th Dec 2005

Unfair businesspractices

28%

Abuse ofDominence

1%

Cartels

68%

Restrainingconcentraion ofEconomic Power

2%

Prohibititedactivities

enterpriser org.

1%- The share of surcharge (2001~2005)-

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Banning Cartels : Leniency Program & BRIASSince 1997 the leniency program has been introduced to deter cartels

The KFTC started operating Bid Rigging Indicator Analysis System(BRIAS) in Dec 2005-It is to prevent harms from bid rigging in public projects

-The system automatically receives electronic bid information from government agencies and examines it to get any clues of bid rigging

-The ceiling for the monetary reward : 100 million won ⇒ 1 billion won

-The first applicant gets a 100 % reduction, while the second one, a 30% and the third one, no reduction at all

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Banning Cartels : recent cartel case in the Telecommunication Industry

Case(2005) surcharge

Cartel between two local call service providers : KT and Hanaro Telecom

115,196 billion won

Cartel among 3 international call service providers : KT , Dacom,Onse telecom

5,379 billion won

Cartel among 4 distance call service providers : KT , Dacom,Onse telecom and Hanaro Telecom

20,363 billion won

Cartel among fiber optic cable providers for Internet cafes : KT , Dacom and Hanaro Telecom

47,047 billion won

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Applying Competition Principles

Identify anti-competitive regulations stipulated in laws &notification

In Government Sector In the Regulated Sector

Promote competition in the once regulated sectors*

*broadcasting, energy and medical &health sector. etc

Since 2004, a total 107 regulations were identified as requiring either elimination or revision

“Taskforce for Regulatory Reform” thoroughly

analyzes individual

Industries’ structure

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‡ The number of companies operating the compliance program :12 (2001)→56 (2002)→101 (2003)→ 193 (2004)→257 (2005)→ 283(2006))

Applying Competition Principles

: to encourage companies to voluntarily comply with competition laws

facilitating the compliance program launched in 2001.(To help the compliance program take root as a critical factor in corporate cultures or corporate management)

- The company that operates compliance program successfully gets a reduction of surcharge or correction order - Evaluation & grading systems will be introduced to assess companies’ operation of the Program.

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Ⅲ. Restraining Concentration of economic Power


A Chaebul policy - Why does a Chaebul concern?

Complicated web-like equity investment

with a small amount of share ownership

Complicated web-like equity investment

with a small amount of share ownership

Korean ChaebulKorean Chaebul

Family members-centered business ownership Family members-centered business ownership

Complex group with multiple businessComplex group with multiple business

Interfering with market

function

Controlling shareholders’ pursuit of private interests

Risk of the whole

economic system

Characteristics

problems

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A Chaebul policy – How does the KFTC regulate it?

Prohibition of Debt Guarantees for Affiliated Company

Ceiling on Total Amount of Shareholding in Other Domestic companies

Limitation of Voting Rights of Finance or

Insurance Companies

Restrictions on Holding company

Prevent Undue Intra-group Transactions

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Ⅳ. ClosingⅣ. Closing

The KFTC believes that free and fair competition in the market will serve as a foundation on which the market economy can be better upgraded.

Towards an advanced market economy, where competition works as a core principle in every sector of the economy,

KFTC will lay a firm foundation for Korea to take a great leap forward in the 21st century by building a competition system that befits today's global & digital world

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Thank you !

www. ftc.go.kr

regional antitrust workshop

Documents

competition principles

abuse of dominance

kftc of ma

businesses market dominance

competition law enforcement3

dominance abuse cases

relevant market

market forces