FTC to Impose Surcharges Even on Voluntary Self-Reports After Investigations Begin

The Fair Trade Commission (FTC) is expected to impose surcharges even on first-place voluntary whistleblowers if they report collusion after an investigation has already been launched.

Only those who voluntarily report in first place before an investigation begins will continue to be fully exempt from surcharges, as is the case under the current system.

The FTC announced today (September 23) that it will put forward a legislative notice for the enforcement decree amendment of the Fair Trade Act containing these provisions until November 2, and an administrative notice for the amendment of the "Regulations on the Operation of Reduction and Exemption Systems for Voluntary Reporters of Unfair Collaborative Acts" until October 13.

The leniency program, commonly referred to as leniency, is a system that reduces or exempts sanctions for those who voluntarily report collusion facts or cooperate with investigations.

It is implemented to easily detect covert collusion, break the trust among collusion participants, and prevent the formation of cartels.

However, as repeat collusion practices have continued, continuous pointed criticisms have emerged that the level of reduction and exemption should be rationalized.

In response, the FTC has decided to differentiate the level of surcharge reductions for voluntary reporters depending on whether they report before or after the investigation starts.

Current laws and decrees exempt first-place voluntary reporters from surcharges regardless of whether it is before or after the FTC launches an investigation.

Moving forward, first-place voluntary reporters before the start of an investigation will receive a full exemption from surcharges as they do currently, whereas first-place voluntary reporters after the start of an investigation will see their surcharges reduced by 75%, differentiating the benefits.

The intention is to increase the incentive for voluntary reporting before investigations begin in order to detect collusion early.

Along with this, if a business receives a voluntary reporting leniency or sanctions for collusion and commits another collusion offense between 5 and 10 years later, the voluntary reporting surcharge reduction benefit will be reduced by half.

This further strengthens current regulations, which restrict voluntary reporting reductions and exemptions only when repeat collusion is uncovered within 5 years.

Once the amendments are reflected, repeat colluders who voluntarily report in first place before an investigation starts will see their reduction benefit scaled back from a full surcharge exemption to a 50% reduction.

For first-place voluntary reporters after an investigation starts, the surcharge reduction rate will drop from 75% to 37.5%.

In addition, the scope of restrictions on reductions and exemptions for businesses sanctioned for collusion will also be expanded.

Currently, the targets for restrictions on repeat collusion reductions and exemptions are defined as: ▲ cases where a business that received voluntary reporting reductions and exemptions engages in collusion again, and ▲ cases where a business sanctioned by the FTC for collusion engages in collusion again that violates the relevant corrective action.

However, criticisms have been raised that the restriction scope for "collusion violating the relevant corrective action" is overly limited, leaving room for enterprises operating in multiple business fields to exploit this loophole.

Accordingly, the FTC is removing the requirement of "violating the relevant corrective action."

It is expected that enterprises caught for collusion will face reduction restrictions regardless of their business sector if they engage in new collusive practices.

Furthermore, the FTC has established explicit grounds to apply reduction restrictions due to repeat collusion even when the business related to the collusion has been succeeded through mergers, divisions, split-mergers, or transfers of business.

The FTC plans to finalize the amendment process in the first quarter of next year, following procedures such as Government Legislation Agency reviews after closely reviewing opinions submitted during this legislative and administrative notice period.

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.