From Controversy Over Unlawful Investigations to Fine Bombshells... Will FTC “Abuse of Authority” Be a Key Issue at the Parliamentary Audit?

Court Approval Rate for Requests to Suspend Enforcement Nears 80% This Year
Appropriateness of "Record-High Fines" Also Expected to Come Under Scrutiny

At the National Assembly Political Affairs Committee’s parliamentary audit of the Fair Trade Commission on October 12, controversy over the FTC’s alleged “abuse of authority,” including on-site inspections and excessive fines, is expected to take center stage. Companies have challenged the FTC’s coercive inspection methods in court, and their legal challenges have repeatedly been upheld. Meanwhile, behind the record-scale fines are refund payments totaling hundreds of billions of won following court defeats, prompting fierce criticism from both ruling and opposition lawmakers over the effectiveness and legality of the sanctions.

Courts grant 79.5% of requests to suspend enforcement... Hanwha, Coupang and others push back

According to political and industry sources on October 11, the judiciary has recently moved to rein in what it sees as excessive exercises of the FTC’s authority. Data from the office of Rep. Seo Il-jun of the People Power Party, a member of the Political Affairs Committee, show that courts granted 31 of the 39 requests companies filed this year to suspend enforcement of FTC measures, a rate of 79.5%. That is a sharp increase from 64.5% in 2024 and is seen as reflecting judicial concerns about excessive investigative practices by administrative authorities. A surge in the FTC’s on-site inspections lies behind the sharp rise in legal disputes. In the second quarter of this year, the FTC conducted 91 on-site inspections of companies, more than 2.5 times the number in the same period last year and far above the previous record, set in the fourth quarter of 2019.

Companies’ complaints have reached a tipping point, with firms saying the FTC exploits the nature of on-site inspections—which are conducted without a court warrant and rely on the consent of the company under investigation—to demand documents indiscriminately without specific grounds for suspicion. A recent case in which the Seoul High Court granted Hanwha’s request to suspend the effect of an FTC order to submit documents is a prominent example. During the investigation, the FTC reportedly operated a Hanwha employee’s mobile phone directly to view text messages, and kept the device in an investigation room for 30 hours without even issuing a receipt for its custody. Hanwha objected, arguing that the FTC’s investigation had exceeded the bounds of lawful authority, and the court granted the request to suspend enforcement.

Late last month, Coupang launched a strong legal challenge, filing a lawsuit seeking to overturn the FTC’s on-site inspection measure and requesting a suspension of enforcement of its order to submit documents. The case arose from an investigation into alleged violations of the Monopoly Regulation and Fair Trade Act, separate from the controversy over an alleged breach of the Administrative Investigation Basic Act’s requirement to give seven days’ advance notice during an on-site inspection in August concerning suspected violations of the Act on Fair Transactions in Large Retail Business. The FTC reportedly demanded an extensive 10 years’ worth of documents dating back to 2016, despite the statute of limitations for sanctions being set at seven years from the date the violation ends. This has raised questions about whether the FTC demanded documents indiscriminately without specifying the alleged violations. Coupang is also seeking a final ruling from the judiciary by filing a re-appeal with the Supreme Court after its request to suspend enforcement of the August on-site inspection was rejected.

Refunds after court defeats near KRW 190 billion over five years... Legality of enforcement under scrutiny

The deluge of fines accompanying the surge in on-site inspections is also a key target of this year’s parliamentary audit. According to data from Rep. Shin Dong-wook of the People Power Party, the FTC imposed fines totaling KRW 2.5 trillion on all companies from January through August this year, nearly double the annual record set in 2017. Of that amount, KRW 1.3615 trillion was imposed on large business groups alone, surpassing in just eight months the total amount imposed over the previous four years.

Some, however, question whether these sanctions are actually effective. As of July, courts had deferred the collection of about KRW 453 billion in fines, a figure that surged 54-fold from 2021, amid concerns over excessive fines. In addition, the FTC has reportedly refunded companies KRW 191.679 billion over the past five years or so after losing lawsuits following its enforcement actions.

In addition to controversy over the abuse of investigative powers, major issues directly affecting household finances are expected to heat up the Political Affairs Committee’s audit. A fierce debate is expected over the proposed cap on delivery-app commissions, with concerns about lower rider wages and reduced consumer welfare set against the government’s stated goal of easing the burden on small businesses. The committee is also expected to examine whether sanctions were appropriate in a large-scale collusion case that resulted in fines totaling hundreds of billions of won across the food industry, including confectionery and bakery companies, as well as allegations of collusion in the way oil refiners set petroleum product prices.

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