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Regional Antitrust Workshop

Regional Antitrust Workshop. Recent Activities of the KFTC. Oct 12, 2006. KFTC, Competition Policy Team Team Manager, Kim Chie-Gul. Contents. Ⅰ. A Brief Introduction to the Recent Change of the KFTC Ⅱ. Policy and Performance on Promoting Competition 1. Banning Abuse of Market Dominance

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Regional Antitrust Workshop

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  1. Regional Antitrust Workshop Recent Activities of the KFTC Oct 12, 2006 KFTC, Competition Policy Team Team Manager, Kim Chie-Gul

  2. Contents Ⅰ. 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

  3. Ⅰ. A Brief Introduction to the Recent Change of the KFTC An organizational restructuring on 19th Dec, 2005 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. Setting up Economic Analysis team, Emerging competition Issue Team, Litigation Team

  4. Ⅰ. A Brief Introduction to the Recent Change of the KFTC 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 1.Refining KFTC’s competition laws and policies Setting 5-main tasks of the KFTC’s policy enforcement 2. Strengthen competition law enforcement 3. Spreading the competition principles 4.Promoting cooperation between large companies and SMEs 5. Realizing consumer sovereignty

  5. 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

  6. Ⅱ. Policy and Performance on Promoting Competition 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 : tounbundle their tied products and to install competitors products • Surcharge : 33 billion won (USD 31million)

  7. Ⅱ. Policy and Performance on Promoting Competition Regulating M&A with Antitrust Competitive Effects • 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 KFTC is reviewing about 600~700 M&A cases a year. - in 2005 :reviewing 685 cases, correction order : 3 cases Theparties of M&A between foreign businessesare required to notify the KFTC of M&A if it affects Korean market - notification case : 13(’03)→58(’04)→72(’05)

  8. Ⅱ. Policy and Performance on Promoting Competition Case ( 2005 ) Case ( 2006 ) Regulating M&A with Antitrust Competitive Effects : recent cases to be recognized of competition restrictiveness 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) Eland Retail + Carrefour KFTC ordered to sell some stores in the area with competition restrictiveness  definition of relevant market as a regional one E-mart + Walmart

  9. Ⅱ. Policy and Performance on Promoting Competition Banning Cartels • Cartel is the Supreme Evil in the market economy • Cartel undermines the market price system and gives harm to consumer welfare KFTC, 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 - The share of surcharge (2001~2005)-

  10. Ⅱ. Policy and Performance on Promoting Competition Banning Cartels : Leniency Program & BRIAS Since 1997 the leniency program has been introduced to deter cartels • 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 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

  11. Ⅱ. Policy and Performance on Promoting Competition Banning Cartels : recent cartel case in the Telecommunication Industry

  12. Ⅱ. Policy and Performance on Promoting Competition Applying Competition Principles In Government Sector In the Regulated Sector Promote competition in the once regulated sectors* *broadcasting, energy and medical &health sector. etc Identify anti-competitive regulations stipulated in laws &notification “Taskforce for Regulatory Reform” thoroughly analyzes individual Industries’ structure Since 2004, a total 107 regulations were identified as requiring either elimination or revision

  13. Ⅱ. Policy and Performance on Promoting Competition 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. ‡The number of companies operating the compliance program :12 (2001)→56 (2002)→101 (2003)→ 193 (2004)→257 (2005)→ 283(2006))

  14. Ⅲ. Restraining Concentration of economic Power A Chaebul policy - Why does a Chaebul concern? problems Controlling shareholders’ pursuit of private interests Interfering with market function Risk of the whole economic system Characteristics Korean Chaebul Complicated web-like equity investment with a small amount of share ownership Family members-centered business ownership Complex group with multiple business

  15. Ⅲ. Restraining Concentration of economic Power A Chaebul policy – How does the KFTC regulate it? Restrictions on Holding company Prevent Undue Intra-group Transactions   Limitation of Voting Rights of Finance or Insurance Companies Ceiling on Total Amount of Shareholding in Other Domestic companies  Prohibition of Debt Guarantees for Affiliated Company

  16. Ⅳ. 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

  17. Thank you ! www. ftc.go.kr

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