The Democratic Party is moving to write into law the Fair Trade Commission's authority to order companies to reset prices distorted by collusion back to pre-collusion levels. The party also plans to extend the statute of limitations on enforcement action to 15 years from the current maximum of 12 years, strengthening the effectiveness of penalties against price fixing.
Rep. Lee Kang-il of the Democratic Party, a member of the National Assembly's National Policy Committee, filed the amendment to the Monopoly Regulation and Fair Trade Act as lead sponsor together with fellow committee members, political sources said on the 13th.
The core of the bill is to state explicitly that the FTC's corrective measures include "resetting prices to levels that restore competition as it existed before the concerted action." The aim is to establish a clear legal basis for correcting the prices formed through collusion, going beyond merely ordering companies to stop colluding. The measure reflects concerns that a binding tool is needed to undo price distortions, after cases in which prices failed to fall sufficiently — or even rose — after collusion was uncovered.
"Corrective orders until now have been read as meaning little more than telling the colluding companies to reset their prices, so they had no real effect," a National Policy Committee official said. "The point is to make the rule clear that prices must come down to pre-collusion levels."
Price reset orders, which had gone unused for years, drew attention after President Lee Jae-myung said in February this year that they should be applied to companies engaged in collusion. The FTC subsequently issued actual price reset orders to the flour and printing paper industries for the first time in about two decades, but the move has been checked by a series of court decisions suspending enforcement.
The bill also contains measures to improve the chances of detecting collusion. Where the FTC has not begun an investigation into a cartel, the period during which it can take action would be extended to 10 years from seven years from the date the conduct ended. Combined with the five-year period that applies once an investigation has begun, the statute of limitations would rise to a maximum of 15 years from 12 years. Provincial offices of education were added to the list of bodies the FTC may ask to submit bidding-related materials and cooperate with it, as part of monitoring collusion in public tenders.
How to calculate the pre-collusion price, however, remains a problem to be solved. The key questions are how to estimate the price that would have formed in the absence of collusion, and how to separate out increases driven by other factors such as rising raw material costs. Debate is also expected over whether it is appropriate for the FTC, whose mandate is to promote market competition, to intervene directly in price formation.