[Why&Next]The Powerful Weapon Against Cartels, "Leniency," Sparks Fresh Debate Over Being a Corporate "Get-Out-of-Jail Card"

Small Printing Companies Protest 190 Billion Won in Fine Reductions

Stricter Penalties Planned for Post-Investigation Self-Reporting and Repeat Offenses

The “leniency program”—a powerful weapon for uncovering cartel activities—has once again sparked controversy over whether it functions as a “get-out-of-jail card” for corporations. The debate reignited after billions of won in fines were reduced through leniency for paper manufacturers involved in a recent price-fixing case, prompting backlash from industry stakeholders. The Korea Fair Trade Commission (KFTC) is currently moving to reform the system to preserve its intended purpose while eliminating concerns about the program’s abuse.

"Corporate Get-Out-of-Jail Card" vs "Essential for Detection and Remedy"

White cardboard production line of a paper manufacturing company. The Asia Business Daily database.

According to the paper industry on July 26, the Korea Federation of Printing Cooperatives and local printing cooperatives across the country recently issued a joint statement regarding the KFTC’s actions against price collusion among paper manufacturers for printing paper. The cooperatives argued, “The KFTC's decision to reduce fines runs counter to the government’s long-standing policy of fair economic principles,” adding, “It is urgent to update the Fair Trade Act so that companies engaging in repeated collusion cannot benefit from leniency.” The KFTC had initially imposed 338.3 billion won in fines, but a total of 194.2 billion won—roughly 57%—was reduced through the program, with companies like Hansol Paper receiving a full exemption on 142.5 billion won. The statement also called on the government and the National Assembly to comprehensively review the effectiveness of the leniency program.

Introduced in 1997, the leniency program allows the first company to self-report to be exempted from the entire fine, while the second to report receives a 50% reduction. While the system excels at incentivizing internal betrayal and breaking up covert cartels, critics have long argued that it has become an “escape hatch” for corporations—allowing them to pocket significant improper gains before evading penalties. Notably, companies benefiting from leniency have sometimes continued engaging in repeated collusion. For example, in February, CJ CheilJedang had its fine for price-fixing sugar reduced by 50% through leniency—even though the company had previously been penalized for the same conduct in 2007 and had also benefited from the leniency program at that time.

An Essential Weapon for Detecting Cartels... System Overhaul to Minimize Abuse

In response to these claims of a “get-out-of-jail card,” the KFTC emphasizes that the leniency program is essential for detecting increasingly secretive and sophisticated collusion. In practice, from 1999 to last year, 669 out of 1,105 cartel cases (60.5%) in which fines were imposed were uncovered through leniency-backed whistleblowing by insiders. The KFTC also notes that the system is not problematic, since it is a “global standard” adopted by competition authorities worldwide, including the United States and European Union. Another positive aspect is that when a company confesses through leniency, affected partners or consumers may be better positioned to win damage claims in civil court.

However, to minimize negative side effects—such as delayed self-reporting intended to reduce liability, or habitual collusion—the KFTC is proceeding with targeted system reforms. For now, companies reporting before an investigation begins will continue to receive full fine exemptions, but those who report as a first-party after an investigation is underway will have their reductions capped at 75%. Additionally, for companies found to have violated the rules again within five to ten years after being penalized for collusion, the reduction will be drastically cut to half of the existing benefit; currently, benefits are only stripped if the infraction recurs within five years.

To address concerns that smaller benefits could weaken companies’ incentives to cooperate, the KFTC is also pushing for a legal revision to increase the maximum base fine rate from 20% to 30%. The commission believes that if penalties become much steeper overall, a 75% reduction will remain a strong incentive to voluntarily report violations. A KFTC official stated, “We will maintain the effectiveness of uncovering covert collusion, but strictly restrict reductions for post-investigation whistleblowing and repeated offenses to prevent abuse of the leniency program. By raising the fine ceiling and expanding rewards for reporting, we aim to reinforce both deterrence against cartels and the fairness of sanctions.”

This content was produced with the assistance of AI translation services.