South Korea Considers Company Splits for Repeat Antitrust Violators

South Korea's Fair Trade Commission (KFTC) is exploring the introduction of structural remedies, including company splits and mandatory share sales, for businesses repeatedly engaging in collusion or unfairly channeling business to affiliated companies. This move stems from a growing recognition that current behavioral remedies, such as orders to cease violations and subsequent fines, are insufficient to fundamentally address recurring anti-competitive practices.

The KFTC is evaluating whether to implement these structural measures in the latter half of the year for cases involving repeated collusion, unfair enrichment of conglomerate owners' families, and improper support. Structural remedies are considered the most powerful tools available to competition authorities, forcing changes in a company's assets or ownership structure when its business practices restrict market competition. These can include orders to split companies, divest shares, or transfer business operations.

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If [collusion] is repeated, it is a matter that would utilize structural measures such as business divestiture.

This consideration is partly driven by the KFTC's assessment that the current legal framework has limitations in achieving lasting reform when structural issues within a business contribute to repeated violations. KFTC Chairman Joo Kyung-bae previously stated that if cartel activities, like the sugar price-fixing by CJ CheilJedang and two other companies, continue to occur despite significant involvement from senior executives and substantial economic impact, structural measures such as business divestiture could be considered.

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Structural measures can be effective when violations are repeated due to structural problems in the industry and behavioral measures alone cannot prevent recurrence.

International examples, such as the U.S. Supreme Court's 1911 decision to break up Standard Oil into 34 companies, demonstrate a long history of structural remedies. While less frequently used in recent decades, these measures are regaining prominence due to increasing market concentration and the expansion of the digital economy. Recent cases include a 2023 U.S. order for Teva Pharmaceuticals to sell off business units involved in drug price collusion. The European Union's competition authorities have also suggested that divesting parts of its ad tech business might be the only solution for Google's alleged anti-competitive practices in the digital advertising market.

However, some experts argue that structural remedies may have limited effectiveness in platform industries where network effects and data play a crucial role. They suggest the need for regulations specifically tailored to platforms. For instance, the EU's Digital Markets Act designates large platforms as "gatekeepers" and imposes specific obligations. Experts like Lee Ho-young from Hanyang University Law School recommend that structural remedies should be applied cautiously and only when violations are proven to stem from structural issues, with limitations to prevent misuse. Kim Yoon-jung from the Korea Legislation Research Institute emphasizes the need for a comprehensive approach, including enacting laws for online platform monopolies and developing specific behavioral measures alongside structural ones to effectively regulate platforms concerning data and other aspects.

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To effectively regulate platforms regarding data, etc., we need to consider not only structural measures but also the enactment of laws for online platform monopolies and the development of specific behavioral measures tailored to platforms.