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Korea’s Recent Trends for Antitrust Enforcement in Response to COVID-19

The outbreak of COVID-19 significantly affected businesses across all industries during recent months. To regulate the businesses coping with sudden adjustments, the Korea Fair Trade Commission (the “KFTC”) has implemented various measures. Among them, we highlight the following.

by Multiple Authors, Lee & Ko

July 13, 2020

Impact of COVID-19 considered as a factor in merger review processes

One of the industries struck heavily by COVID-19 is the airline industry and a number of airlines and aviation-related businesses in Korea are understood to be on the brink of bankruptcy. Such extraordinary circumstances played a role in the recent KFTC’s approval of Jeju Air’s acquisition of shares in Eastar Jet, both once-prominent low-cost airlines of Korea. The KFTC granted unconditional clearance for the proposed merger, accepting the failing firm defense, given Eastar Jet’s unstable financial status. In reaching such a decision, the KFTC noted that it is unlikely for Eastar Jet to quickly recover its ability to repay its debts, given how it suspended both its domestic and overseas flights and is in the process of restructuring its labor force. Through the decision, the KFTC revealed its intent to quickly review merger notifications filed by business entities related to the industries suffering from financial difficulties due to COVID-19.

Implementation of Procedural Extension

The KFTC also implemented measures to relieve the businesses affected by COVID-19 from the additional burden of submitting materials to the KFTC. Before COVID-19, examinees involved in the KFTC’s investigations were obligated to submit their opinions on the Examiner’s Report issued by the KFTC within four weeks (three weeks for cased adjudicated before the condensed three-member panel). In response to most businesses making the transition to telecommuting to avert COVID-19 outbreak, the KFTC announced that it would temporarily extend the above deadline to six weeks (five weeks for cases adjudicated before the condensed three-member panel). In doing so, it applied the proviso to the procedural rule that the KFTC may change the deadlines where it is determined that more time than the statutory four weeks would be necessary for submitting the examinee’s opinion. The KFTC announced that it expects the two-week extension to allow sufficient time for the examinee to submit its opinion, thereby guaranteeing the examinee’s right to defense. The extension is expected to be granted until the COVID-19 situation subsides.

Establishment of Additional Guidelines

On May 15, 2020, the Korean government announced its plan to improve the system for aiding recovery from COVID-19. The plan focuses on strengthening the foundation of fair trade in the market, taking into account that the economic and social damages resulting from COVID-19 are more likely to affect the financially-challenged. As part of this plan, the KFTC announced its decision to establish new guidelines.

First, in order to address the rapid growth in the online distribution market to avoid in-person contacts, the KFTC plans to establish a guideline to more effectively regulate unfair trade practices that occur online, such as online distribution platforms shifting the cost to the distributors. The current regulation on large retail businesses is tailored to in-person transactions and therefore has limitations in regulating the unfair trade practices in online distribution markets.

Another guideline to be implemented by the KFTC focuses on the protection of consumers’ rights. COVID-19 caused a rapid increase in the cancellation of contracts and disputes over default payments in certain industries such as the tourism and the wedding industries. The KFTC, therefore, announced that it plans to establish a standard for exemption, adjustment, and deduction of default payments for certain industries.

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