Hanwha Halted by Court, Coupang Blocks Entry... Fair Trade Commission's 'On-Site Investigations' Put to the Test

Limitations of Voluntary Investigations Without Compulsory Power Exposed

Legislation for "1% Sales-Based Surcharge" Expected to Accelerate

An unprecedented court decision has been issued to suspend the enforcement of a data submission order imposed on a company during an on-site investigation by the Fair Trade Commission. Following Coupang's rejection of an investigation into alleged violations of the Large-Scale Distribution Business Act, the court has also accepted the injunction filed by Hanwha Group, raising concerns that the Fair Trade Commission's core investigative tool—on-site investigations—is being put to the test.

On September 9, the Administrative Division 7 of the Seoul High Court granted Hanwha and its employees' request to suspend the enforcement of the data submission order against the Fair Trade Commission and temporarily halted the order's effect until the end of January next year. Hanwha argued that during the on-site investigation into brand licensing transactions among its affiliates, the Fair Trade Commission accessed employees’ mobile text messages without a warrant, forced audio recordings of statements without consent, and demanded the retention of devices. In response, the Fair Trade Commission immediately clarified that the decision was not a ruling on illegality, but a provisional measure, and insisted the investigation was lawful and conducted with prior consent. Nevertheless, with the main litigation ahead, disruptions to the investigation appear inevitable.

Previously, Coupang, facing an on-site investigation over alleged abuse in supplier relations, cited a provision in the Administrative Investigation Basic Act requiring written notice at least seven days prior to an on-site probe and blocked investigators’ entry on four occasions. In the investigation into violations of the Large-Scale Distribution Business Act, Coupang exploited a loophole: the lack of clarity regarding exceptions to the advance notice rule, countering the investigation with a petition for an injunction.

The recurring disputes over investigative authority stem from the fundamental limitation that Fair Trade Commission on-site inspections are voluntary administrative investigations lacking compulsory power. Unlike the prosecution, which has the authority to execute search and seizure warrants, the Fair Trade Commission has no such means, making it difficult to enforce compliance if companies cite procedural grounds and refuse cooperation. Moreover, since the maximum penalty for obstructing investigations is a fine of 200 million won under the Large-Scale Distribution Business Act, companies facing potential surcharges ranging from tens to hundreds of billions of won may calculate that absorbing the fine—and shutting their doors to investigators—is a far more advantageous option.

The Fair Trade Commission and the National Assembly are accelerating the passage of the so-called "Three Bills for Eradicating Investigation Obstruction," which would allow surcharges of up to 1% of annual sales to be imposed on companies that refuse or obstruct investigations. In a recent interview with a media outlet, Fair Trade Commission Chairman Joo Byunggi said, "If a company can pay 200 million won to avoid billions of won in surcharges, why wouldn’t they do it? We need to introduce criminal penalties for refusal to cooperate with investigations under the Large-Scale Distribution Business Act and establish a system for imposing a 1% sales-based surcharge to strengthen investigation authority." However, some suggest that the Fair Trade Commission's aggressive approach under the current administration may be leading to these complications. In the second quarter alone, the Fair Trade Commission conducted a record-high 91 on-site investigations.

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