Navigating the Globe: Cartel Enforcement Around the World

Transcription

1 Navigating the Globe: Cartel Enforcement Around the World Chapter 5: Korea Presented by the Cartel and Criminal Practice Committee and the International Committee September 13, 2012

2 Presenters Douglas M. Tween Cholsoo Han Hoil Yoon Moderator, Partner, Baker & McKenzie LLP, New York, New York Secretary General, Korea Fair Trade Commission, Seoul, Korea Partner, Yoon & Yang LLC, Seoul, Korea H. Stephen Harris, Jr. Partner, Baker & McKenzie LLP, Washington, D.C.

3 Cartel Laws Investigative Process Leniency/Immunity Program Key Issues Recent Developments Discussion Outline

4 Cartel Laws Monopoly Regulation and Fair Trade Act (MRFTA) Korea Fair Trade Commission (KFTC) Independent, ministerial-level government organization 9 Commissioners Criminal vs. administrative fines or corrective measures Who enforces the MRFTA? (KFTC or Public Prosecutor) MRFTA application to individuals and corporations Extraterritorial reach of MRFTA

5 Recent Changes to MRFTA 2012 Amendments to the MRTFA Criminalized certain types of interference with investigations Increased maximum penalties for trade associations Extended statute of limitations to 7 years after the anticompetitive behavior, if KFTC has not opened investigation If KFTC has opened an investigation the statute of limitations is 5 years after the probe is initiated Clarified that if a company splits off from its former parent company after violating antitrust laws, KFTC can fine the original company, the offshoot, or newly-established entities

6 Recent Changes to MRFTA 2012 Amendments to the MRFTA In the case that 2 companies engaged in a cartel First undertaking to apply for leniency receives 100% exemption from administrative fines No exemptions/reductions for the second undertaking In the case that 3 or more companies engaged in a cartel No exemptions/reductions for the second and subsequent undertakings that apply for leniency after a period of 2 years has passed since the first undertaking applied for leniency

7 Investigative Process Administrative Investigations On-site inspections, seize or request documents, witness interviews, and requests for information Review information and documents Issue an Examiner s report Hearing Decision by the Commission

8 Investigative Process Criminal Investigation Criminal referral from the Commission Independent investigation and prosecution for bid-rigging Based on Korean Criminal Act or Construction Industry Basic Law Arrest, or search and seizure Prosecution Decision by the Court

9 Calculation of Fines Detailed Guidelines (1999), as amended, with calculation in steps: Basic amount based on affected (or relevant) sales revenue by gravity factor up to 10% Adjustments to the basic amount for aggravating or mitigating factors such as duration, record of past violations, amount of profit gained, whether a leader or follower, whether coerced others, obstruction of investigation, involvement of a director, whether implemented, cooperation for investigation, voluntary termination or correction, ability to pay, implementation of compliance program, industry-wide economic hardship, overall economic conditions and effects on the market Legal maximum cap: 10% of total affected sales revenue Immunity/leniency

10 Leniency/Immunity Program KFTC is responsible for carrying out the leniency program, which only applies to unfair collaborative acts (i.e. cartels) Applies to domestic as well as international cartel cases Information on individual cases and the identity of applicants is classified to protect confidentiality Only first undertaking that files an application for leniency and has its applicant status confirmed (either before or after KFTC has begun an investigation) can receive full immunity from administrative fines or corrective measures

11 Leniency/Immunity Program To receive full immunity, the applicant must: Be the first to provide independent evidence necessary to prove a cartel Make a voluntary report before KFTC obtains any information or enough evidence to prove a cartel Fully cooperate with KFTC's investigation, by making statements concerning cartels and submitting relevant documents until the investigation is completed End its cartel involvement immediately after filing an application for leniency Not have been involved in any acts that coerced other entities either to participate in cartels or not to cease Not be repeatedly involved in cartels within a certain period of time (5 years under the Leniency Notice)

12 Leniency/Immunity Program The second undertaking to apply can receive a 50% reduction in administrative fines if the undertaking: Is the second to independently provide evidence that is necessary to prove a cartel Fully cooperates with KFTC's investigation, by making statements concerning cartels and submitting relevant documents until the investigation is completed Ends its cartel involvement immediately after filing an application for leniency Has not been involved in any acts that coerced other entities either to participate in cartels or not to cease Has not been repeatedly involved in cartels within a certain period of time (5 years under the Leniency Notice)

13 Leniency/Immunity Program Leniency is not available for later applicants Individuals are not subject to administrative fines for competition law breaches, so there is no separate leniency program for individuals The leniency program does not explicitly provide immunity from criminal prosecution The Prosecutor's Office is the sole authority, but can only act if there is a referral by KFTC Currently, KFTC policy is not to make a referral of an undertaking and/or its executives or employees if the undertaking has qualified for first- or second-ranked leniency status

14 Leniency/Immunity Program Proceedings against individuals Once leniency conditions are satisfied, KFTC's policy is not to refer the executives and employees to the Prosecutor's Office for criminal prosecution. Therefore, individuals are not subject to criminal proceedings Employees' interests Since KFTC policy is not to refer such executives and employees to the Prosecutor's Office for criminal prosecution, no conflict of interest between the undertaking and its executives and employees is likely to arise

15 Leniency/Immunity Program Markers Simplified application requires only the applicant's identity and an overview of the cartel rather than complete information Date of filing is considered to be the date this simplified application is submitted, with a supplemental period of 15 days Additional supplemental period of 60 days may be granted if the applicant shows justifiable reason, that is, it requires a considerable time to collect evidence

16 Leniency/Immunity Program Undertaking must complete the full application within this period, and the application then proceeds to review Supplemental period can be extended over 60 days if KFTC considers such an extension necessary for the collection and submission of evidentiary materials and statements Applications can also be made orally KFTC s case examiner will issue a report based on the findings Same as a Complaint in the U.S. and Statement of Objections in the EU)

17 Extraterritorial Application of the MRFTA to International Cartels KFTC's ability to apply Korea's competition law to international cartels has increased In 2009, KFTC issued corrective orders and administrative fines to 4 foreign copy paper companies First international cartel that KFTC handled through its own investigations Also in 2009, KFTC imposed corrective orders and administrative fines on 6 manufacturers in the marine hose cartel First case of international bid-rigging that KFTC detected and sanctioned

18 Extraterritorial Application of the MRFTA to International Cartels In 2010, KFTC imposed corrective orders and administrative fines of billion won on 26 air cargo carriers First case conducted across the world in collaboration with foreign competition authorities, including U.S. and EU In 2011, KFTC imposed corrective orders and administrative fines of 194 billion won on 10 TFT- LCD Panel makers Largest international cartel case KFTC has handled in terms of sales and administrative fines

19 Key Issues The interplay of administrative, criminal and civil damage exposure in Korea has resulted in greater detectability and greater exposure for companies as well as individuals in the form of administrative fines (for companies only), criminal exposure, civil damages, disqualification as directors/officers, and disqualification for bidding for public or semi-public procurement

20 Recent Developments In 2011, KFTC found that 16 life insurance companies engaged in mutual discussions over an extended period regarding the estimated interest rate and official interest rate of individual insurance products and agreed upon such rates KFTC issued corrective order and imposed fines of billion won

21 Recent Developments In 2012, KFTC found that 4 companies that manufacture and sell ramen (instant noodles) engaged in a cartel by providing information on proposals to increase prices of ramen by the leading ramen company to other ramen companies (i.e., information exchange) and, such other ramen companies gradually raised their prices at same or similar levels as such proposal KFTC issued a corrective order and imposed fines of billion won At the beginning of 2012, the Seoul High Court affirmed the KFTC s decision against air cargo carriers, including Thai Airways International, Air France-KLM and Cathay Pacific Airways Limited

22 Recent Developments In 2011, KFTC amended its Fair Tender Procedures Guidelines KFTC may now request that a company s eligibility to participate in a tender be restricted if a company that has more than five penalty points in the last five years engaged in bid-rigging again Previous Guidelines provided that KFTC may request such restriction if a company that has more than five penalty points in the last three years engaged in bid-rigging again Purpose of the amendment is to reinforce prevention of bidrigging, especially in the public sector

23 Recent Developments In 2012, KFTC amended its Administrative Fine Notification Scope for reducing administrative fines increased from a maximum of 20% to 50% if effects from cartel are actually eliminated through means such as returning the price of cartelized products/services to the original price or compensating for damages from a cartel Undertakings that receive leniency are excluded Scope for increasing administrative fines increased from 30% to 40% for acts of interfering with an investigation Such increases in administrative fines classified into increases of 40%, 30% and 20% based on the type of interference with an investigation

24 Recent Developments New regulation permits increasing administrative fine by up to 20% if a company that was previously ordered to take corrective measures engages in the same kind of act and is ordered to take corrective measures again within 3 years

25 Biographies

26 Cholsoo Han Secretary-General Korea Fair Trade Commission 217 Banpo Dae-ro Seocho-gu, Seoul, Korea T: F: Cholsoo Han is responsible for overall management of the Korea Fair Trade Commission s policy making and law enforcement functions. He started his career in 1983 at the Economic Planning Board. Since joining the KFTC in 1995, he worked as Director General of various bureaus including the Cartel Investigation Bureau, Competition Policy Bureau, and Consumer Policy Bureau. He also worked as Director of various divisions including the Competition Policy Division. He received his J.D. from Syracuse University Law School in 1998.

27 Hoil Yoon Hoil Yoon is Chairman of Yoon & Yang in Seoul, which is one of the largest law firms in Korea, with over 260 attorneys. He leads Yoon & Yang s antitrust practice, which has been recognized by the Global Competition Review as Elite for His practice concentrates on antitrust, international business transactions, and international litigation and arbitration. He has worked extensively with respect to mergers and acquisitions, cartels, dominance abuse, and unfair trade practices; distribution, pricing, and the intersection of intellectual property and antitrust; antitrust litigation; and international commercial/corporate litigation and arbitration. He has been included in GCR s Who s Who of Competition Lawyers. Hoil Yoon Yoon & Yang LLC 34th Fl., ASEM Tower 159 Samsung-dong, Gangnamgu Seoul, yoon.hoil@yoonyang.com Prior to establishing Yoon & Yang, he practiced law in the U.S. as a partner of Baker & McKenzie from 1979 to He is currently Chairman of the Asia Competition Association and, since 2002, has been serving as a nongovernmental advisor to the International Competition Network. He is a member of the ABA s Section of Antitrust Law where he was a member of the International Cartel Task Force and of the International Task Force. He served as a member of the Competition Policy Advisory Board of the KFTC, a nonstanding commissioner of the KFTC, and a judge of the Seoul District Court. He received his J.D., magna cum laude, from Notre Dame University (where he was an editor of the law review), and his LL.M. and LL.B. from Seoul National University. He is admitted to the bars of Korea as well as of New York, Illinois, Washington, D.C., and the U.S. Supreme Court.

28 H. Stephen Harris, Jr. H. Stephen Harris, Jr. Baker & McKenzie LLP 815 Connecticut Avenue, NW Washington, DC T Stephen.harris@bakermckenzie. com Steve Harris is Chair of Baker & McKenzie s North America Antitrust & Competition Group. Mr. Harris is widely published and globally recognized as a leading antitrust lawyer by publications including Chambers USA ( ), International Who's Who of Competition Lawyers ( ), International Who's Who of Business Lawyers (2012), and PLC Which lawyer? ( ). Mr. Harris practices antitrust law, including merger control filings and administrative proceedings, class actions and cartel investigations, before US and international courts and agencies. Steve co-authored, Anti- Monopoly Law and Practice in China, Oxford University Press, 2011, and Intellectual Property, Competition Law and Economics in Asia, Hart Publishing, Steve is Chair of the Competition Committee of the IPBA, a Non-Governmental Advisor to the International Competition Network, and a member of the International Task Force of the ABA Antitrust Law Section. Steve received his J.D., with honors, in 1982 from Columbia University School of Law/Parker School of Foreign and Comparative Law. He received his A.B., magna cum laude, from Cornell University, College of Arts & Sciences in He is admitted to practice in Washington, DC, New York, the U.S. Supreme Court, and the Supreme Court of England & Wales~United Kingdom.

29 Douglas M. Tween Doug Tween is Chair of Baker & McKenzie's New York Litigation group, a member of the firm s North American Antitrust Steering Committee, and Chair of the firm s Global Cartel Task Force. He brings extensive courtroom trial experience to the defense of companies and individuals in antitrust and white collar criminal and regulatory investigations, as well as complex civil litigation and class actions. He also advises on crisis management, conducts internal investigations, and assists corporations with compliance, risk management, and governance issues. Douglas M. Tween Baker & McKenzie LLP 1114 Avenue of the Americas New York, NY Douglas.tween@bakermckenzie. com Doug is Co-Chair of the American Bar Association's Cartel and Criminal Practice Committee, a Non-Governmental Advisor to the International Competition Network, and a New York Super Lawyer. From 1990 to 2005, he served as a Trial Attorney with the U.S. Department of Justice Antitrust Division. He was one of the U.S. government's most highly-honored antitrust trial attorneys, having received the Attorney General's Distinguished Service Award, the Antitrust Division Award of Distinction, and numerous other citations. Doug received his J.D., cum laude, in 1989 from Northwestern University School of Law, where he was Articles Editor of the Law Review. He received his B.A. from Columbia College in After graduation from law school, he served as a law clerk to the Honorable William H. Timbers of the U.S. Court of Appeals for the Second Circuit. He is admitted to practice in New York and Connecticut.