Hello, this is Attorney Eom Sang-yoon of Cheongchul Law Firm.

Cartels, in which businesses jointly decide prices, trading terms, supply volumes and the like, are the archetypal hard-core violation that artificially distorts competition in the market, and since the start of 2026 the Korea Fair Trade Commission (KFTC) has been tightening sanctions one after another to deter them. The amended Surcharge Notice, in force since April 30, 2026, raised the lower bound of the surcharge imposition rate for cartels from 0.5% to 10% and broadly lifted the ex ante imposition standards, and the amended Reporting Reward Notice, in force since June 18, 2026, abolished the cap on reporting incentives so that a reward equal to 10% of the surcharge can now be paid without limit. Next, the KFTC has signaled legislation aimed at taking away the very business licenses of repeat cartel offenders.

In its plan for major tasks in the second half of the year, announced on August 4, 2026, the KFTC stated that it would establish a legal basis to order the cancellation of registration or a suspension of business for a certain period against businesses that repeatedly engage in cartels, and that it would at the same time pursue limits on leniency (voluntary reporting) reductions for repeat cartel offenders.

The Legislative Direction for Deterring Cartels

The traditional tools for deterring unfair collaborative acts (cartels) under the Monopoly Regulation and Fair Trade Act (공정거래법) can be summarized as (i) economic sanctions such as surcharges, (ii) internal detection through the leniency program for voluntary reporters, and (iii) criminal referral. Of these, economic sanctions have conventionally centered on surcharges proportional to relevant turnover, and leniency has operated through the powerful incentive of a 100% surcharge reduction and exemption from criminal referral for the first-in-line reporter. It has repeatedly been pointed out, however, that businesses accept surcharges as 'a kind of business expense' or use leniency as a means of ending a cartel and, in effect, as a gateway to immunity.

In response to these criticisms, the KFTC is overhauling the substance of its cartel sanctions.

1. Amended Surcharge Notice, in force from April 30, 2026: the lower bounds of the surcharge imposition rate for cartels were raised to 15% for very serious violations, 15% or more for serious violations and 10% or more for less serious violations, and the maximum reduction for voluntary correction was cut from 30% to 10%. The ex ante surcharge exposure upon detection of a cartel has risen to a level incomparable with the past.

2. Amended Reporting Reward Notice, in force from June 18, 2026: the previous cap of KRW 3 billion on rewards was abolished and 10% of the surcharge was set as the base amount of the reward. For large cartels, rewards in the tens of billions of won have become possible, and the key point is that the threshold for internal whistleblowing incentives has been lowered.

3. Amendment to the Fair Trade Act being pursued in the second half of 2026: a new basis for cancellation of registration and suspension of business against repeat cartel offenders is to be created, together with limits on leniency reductions for repeat cartel offenders. On top of higher economic sanctions and a greater probability of detection, the aim is to lower the incentive to join a cartel through the possibility of losing the business license itself.

Accordingly, the nature of the risk a business bears when it joins a cartel appears set to shift from a 'one-off cost' to a 'risk accompanied by the danger of losing its business license.' Where leniency has so far functioned as a gateway for after-the-fact damage control, limits on leniency reductions for repeat offenders may make such after-the-fact damage control itself difficult.

Planned Cancellation of Registration and Suspension of Business for Repeat Cartel Offenders

The Fair Trade Act has traditionally provided, as sanctions against cartel participants, (i) corrective measures (Monopoly Regulation and Fair Trade Act Article 42 (공정거래법 제42조)), (ii) surcharges (Article 43) and (iii) criminal referral (Article 129), but it has had no express provision for cancelling registration or suspending business for a certain period on the ground of the cartel itself. Individual industry statutes such as the Framework Act on the Construction Industry (건설산업기본법) have contained provisions treating repeated cartel conduct as a ground for restricting bid participation eligibility or for suspending business, but these were only an indirect route, taking the form of dispositions by the contracting authority or the competent administrative agency.

The amendment to the Fair Trade Act now being pursued would expressly provide in the statute a basis for the KFTC to cancel a business's registration or suspend its business for a certain period on the direct ground of a cartel. The detailed requirements will be settled in the legislative process, but in light of the direction announced so far, the following points appear likely to be the key variables.

1. The requirement of repetition: the foremost issue is how many cartel precedents over how many past years are needed for a business to be assessed as a repeat offender, and whether such 'precedents' cover only surcharge payment orders or also corrective orders and criminal referrals. Considering that the Surcharge Notice uses the past five years as the reference period for aggravation on repetition, and that for cartels it is designed so that a single instance in the past ten years can result in a 100% aggravation, it is highly likely that the requirements for suspension of business and cancellation of registration will be set with stricter frequency and period thresholds.

2. The type and duration of the disposition: how the period of a business suspension is set, and from what point re-registration becomes possible after a cancellation, will have to be decided. Given that the registration systems designated and administered by the KFTC are not set out in the Fair Trade Act itself, cancellation of registration is expected to call for legislative technique that also coordinates the interface with the registration and licensing systems scattered across individual industry statutes.

3. The problem of controlling discretion: just as deviation from or abuse of discretion in surcharge calculation has served as the foothold for ex post control, suspension of business and cancellation of registration will likewise be subject to ex post judicial review in light of the principles of proportionality and equality. Because the gravity of losing a business license far exceeds that of a surcharge, the strictness of proportionality review is highly likely to be correspondingly greater.

If this amendment to the Fair Trade Act is enacted, the biggest practical change is that a business involved in a cartel, when deciding whether to join the next one, will weigh not 'whether to accept the surcharge and keep the profit' but 'whether to stake its business license itself.' In particular, businesses that have accumulated a record of repeated participation, whether in bid rigging in public procurement or price fixing in a specific industry, may need to fundamentally reconsider how they assess the risk that a single act of cartel participation would bring.

Limits on Leniency Reductions and How Businesses Should Respond

The reduction and exemption program for voluntary reporters and others (Monopoly Regulation and Fair Trade Act Article 44 (공정거래법 제44조)) has functioned as the central channel for detecting cartels and, from the business's perspective, as the most powerful exit route. With clearly defined incentives such as a 100% surcharge exemption and exemption from criminal referral for the first-in-line reporter and a 50% reduction for the second, practice has in effect operated on the principle that 'whoever reports first wins' from the moment a business decides to end a cartel.

The core of this legislative plan, meanwhile, is to limit these reductions for repeat cartel offenders. The details will be settled in the legislative process, but taking the announced policy direction as a whole, the program is expected to operate along the following lines.

1. Complete exclusion from reductions: for a business with a record of having received a cartel surcharge payment order within a certain past period, the most likely approach is to exclude it entirely from surcharge reductions, or to sharply reduce the extent of the reduction, even if it is the first-in-line reporter.

2. Limits on exemption from criminal referral: whereas exemption from criminal referral has previously followed automatically as an effect of a reduction decision, for repeat cartel offenders the exemption from criminal referral may be separated and assessed independently of the surcharge reduction.

These changes foreshadow a shift in how businesses respond to cartel investigations. First, because the structure in which leniency functioned as an 'all-purpose exit' would in effect be closed to repeat cartel offenders, the weight of an ex ante compliance system that prevents cartels from arising in the first place will need to increase. Next, because a business with a prior cartel record that becomes exposed to a new cartel allegation will have a much narrower prospect of resolving it through leniency, investigation response, criminal defense and defense against civil damages claims must be planned in an integrated manner from the earliest stage of the allegation. Furthermore, the very competitive structure among cartel participants over 'who reports first' may change. For a business with no prior record the value of reporting first remains intact, whereas for a business with a prior record the appeal of leniency shrinks, and the incentive to apply for leniency at all may weaken.

How the specific amendment bill will ultimately be drafted remains to be seen, but businesses should keep a close eye on the policy trend described above and take it into account when responding to cartel allegations.