KFTC's New Investigation Unit: Reflect on Why the Investigation Bureau Was Abolished 21 Years Ago

South Korea's Fair Trade Commission (KFTC) is set to establish a new 'Special Investigation Planning Unit' to exclusively handle large-scale unfair trade cases. This specialized body is intended to address complex investigations involving platform companies and major corporations, as well as cartels that affect public livelihoods.

However, the business community has expressed apprehension, recalling the negative experiences with the KFTC's investigation bureau, which was abolished 21 years ago. Concerns are mounting that the new unit might replicate the perceived overreach and excessive regulation of its predecessor.

The KFTC's workforce is undergoing a substantial expansion. Having already confirmed a hiring plan for 167 new employees earlier this year, the commission now intends to recruit an additional 237 individuals by June, including the 40 members for the new unit. This will increase the total number of employees to 1,051, a 62.4% rise in just one year.

Furthermore, the KFTC is strengthening its investigative planning functions, reminiscent of the past investigation bureau, which was infamously dubbed the 'grim reaper of large corporations.' This bureau, equipped with powers to track accounts and demand financial data after the Asian financial crisis, was criticized for focusing on investigations favored by the government and for excessively imposing fines, thereby stifling corporate activities.

The decision to abolish the investigation bureau in 2005 by the Roh Moo-hyun administration was attributed to the problematic nature of its regulation-centric approach to large businesses. The government at the time aimed to transform the KFTC into a market-friendly watchdog focused on preventing cartels and protecting consumers. However, subsequent administrations have repeatedly shifted their focus back to large corporations, with attempts to re-establish similar investigative bodies under the Park Geun-hye and Moon Jae-in governments.

The establishment of the Special Investigation Planning Unit could lead to overlapping responsibilities with existing departments handling large corporations and platform businesses, creating a redundant organizational structure. Without clear definitions of the unit's scope, investigation procedures, duration, and internal role distribution, along with adequate protection for the rights of investigated companies, the risk of excessive and duplicated investigations remains high.

The article argues that the government's practice of dictating ideal corporate governance structures and imposing uniform regulations based on asset size is rare globally. It warns that as the KFTC's regulatory power grows, companies may prioritize appeasing the government and regulations over market dynamics, potentially fostering lobbying activities. The recent trend of 12 former KFTC officials joining law firms in the past five years is cited as evidence. The increasing burden of 'Galapagos regulations,' which deviate from global standards, could also reignite debates about unfair competition with foreign companies. The editorial concludes by urging a reflection on the reasons for abolishing the investigation bureau 21 years ago before the KFTC significantly expands its size.