Hello. I am Attorney Lee Young-kyung of Law Firm Chungchul.

The Fair Trade Commission’s fine system will be significantly strengthened in 2026. As a follow-up to the FTC’s announcement of “Improvement of the Fair Trade Commission’s Fine System” on December 30, 2025, the FTC amended and implemented the Fair Trade Act’s “Notice on Detailed Standards for Imposition of Fines, etc.” on April 28, 2026 (effective April 30, 2026), and on the same day announced legislative and administrative pre-notice of amendments to the enforcement decrees and fine notices in the areas of the Subcontracting Act, Franchise Business Act, Large-Scale Distribution Business Act, and Agency Act.

The key points can be summarized as: (i) a substantial increase in the base rate for fines on unfair support and private gain diversion, (ii) stronger aggravation for repeated violations, and (iii) a reduction or elimination of discretionary fine reductions. As the fine risks for companies violating the Fair Trade Act, Subcontracting Act, Franchise Business Act, Distribution Act, and Agency Act will increase sharply, prior compliance reviews have become more important than ever.

This column was prepared based on the Fair Trade Commission’s press release, and please note that some details may change through the legislative and administrative pre-notice procedures.

1. Amendment and implementation of the Fair Trade Act Fine Notice (effective April 30, 2026) – Significant strengthening of fines for collusion and unfair support

A. Major increase in the lower limit of the base rates for collusion, unfair support, and private gain diversion

The lower limit of the base rate for all types of violations under the Fair Trade Act will be raised. For unfair concerted acts (collusion), the base rate will be increased so that even violations with a lower degree of seriousness will be subject to at least 10% (current 0.5%), serious violations at least 15% (current 3.0%), and very serious violations at 18% to 20%. For fines related to unfair support and private gain diversion, the lower limit of the base rate will be raised from 20% to 100%, allowing the full amount of support to be recovered, and the upper limit will also be raised from 160% to 300%, making it possible to impose up to three times the amount of the support.

B. Stronger aggravation for repeated violations – 100% aggravation for even one violation within 10 years in collusion cases

Under the current rules, aggravation for repeated violations is 10% for one prior violation within the past five years, up to 80% depending on the number of violations. After the amendment, however, even one prior violation can lead to up to 50% aggravation, and up to 100% depending on the number of violations. In particular, fines for collusion may be aggravated by up to 100% if there has been even one prior fine payment order within the past 10 years, further increasing the compliance burden in collusion cases.

C. Reduction of discretionary fine mitigation factors

Mitigation for cooperation at the investigation and review stages (currently 10% each, 20% in total) has been reduced to a total of up to 10% only when there is consistent cooperation from the investigation stage through the conclusion of review. The mitigation rate for voluntary correction has also been reduced from up to 30% to 10%, and the provision allowing mitigation for minor negligence (10%) has been deleted.

2. Legislative and administrative pre-notice of amendments to the fine notices for the Subcontracting Act, Franchise Business Act, Distribution Act, and Agency Act – differentiated into a four-tier imposition system

A. Increase in base rates and base amounts under the Subcontracting Act, Franchise Business Act, Distribution Act, and Agency Act

The FTC plans to refine the existing three-tier imposition system into a four-tier system in the areas of the Subcontracting Act, Franchise Business Act, Large-Scale Distribution Business Act, and Agency Act, while increasing the base rates and base amounts. Under the Subcontracting Act, the base rate for very serious violations will rise from 60% to 80% to 90% to 100%, and the base amount from KRW 900 million to KRW 2 billion to KRW 1.8 billion to KRW 2 billion. Under the Large-Scale Distribution Business Act, the base rate for very serious violations will rise from 140% to 180% to 200%, and the fine amounts under the Franchise Business Act and the Agency Act will also increase by a similar margin. In the franchise sector, the reference period for calculating sales will change from the year immediately before the violation to the fiscal year immediately before the date the violation ended, and in the agency sector, the number of factors considered in the detailed evaluation criteria table will expand from four to six.

B. Stronger aggravation for repeated legal violations and retaliatory measures

For the Subcontracting Act, Franchise Business Act, Distribution Act, and Agency Act, even one prior violation within the past five years can result in up to 50% aggravation, and up to 100% depending on the number of violations. Aggravation for retaliatory measures is being raised from 20% to 30% in the agency sector, and in the franchise sector, a new separate aggravation rule is being introduced, allowing aggravation of up to 30%.

C. Reduction of fine mitigation and establishment of grounds for ex officio revocation

Mitigation for cooperation in the investigation and review stages will be available only when there is cooperation throughout the entire process, and limited to within 10%. The mitigation rate for voluntary correction is being reduced from up to 50% to within 10%, and will be recognized only where “a substantial portion of the effects of the violation has been eliminated.” A new basis is being established for ex officio revocation of mitigation if a business that received cooperation-based mitigation later changes its statements at the litigation stage, and the franchise-sector provision allowing mitigation for minor negligence (within 10%) will be deleted.

D. Schedule for legislative and administrative pre-notices

The amendment to the enforcement decree will undergo legislative pre-notice from April 30, 2026 to June 9, 2026, and the amended fine notice will undergo administrative pre-notice from April 30, 2026 to May 20, 2026. After gathering opinions and undergoing review by the Ministry of Government Legislation, the amendments are expected to be finalized and implemented.

3. Common implications of the FTC’s strengthened fine regime – the need for corporate compliance reviews

A. Structural expansion of fine risks in the fair trade, subcontracting, franchise, distribution, and agency sectors

Taken together, these two rounds of amendments and notices show that the level of fines across major statutes under the FTC’s jurisdiction, including the Fair Trade Act, Subcontracting Act, Franchise Business Act, Large-Scale Distribution Business Act, and Agency Act, will increase by roughly twofold. In particular, fines for unfair support and private gain diversion may not only result in recovery of the full support amount, but, in very serious cases, may be imposed at up to three times the support amount, thereby becoming far more punitive than before and no longer merely a cost of doing business.

B. Possibility of explosive fine increases in repeated violation cases

Because even one prior violation can trigger up to 50% aggravation, and repeated occurrences can lead to up to 100% (double) aggravation, companies with a history of repeated violations at the group or business-site level face the risk that fines for a single case may reach twice the previous level. In particular, collusion fines can be aggravated by 100% with even one prior violation within the past 10 years, making systematic management of similar violation histories extremely important.

C. Need to redesign response strategies for FTC investigations and voluntary correction

The scope of mitigation for consistent cooperation at the investigation and review stages (10%) and voluntary correction (10%) has been cut to less than half, and even if cooperation-based mitigation is granted, it can be revoked ex officio if statements are reversed at the litigation stage. Accordingly, the strategy of admitting wrongdoing at the administrative stage and then contesting it in court has in practice become difficult. It is necessary to assess from the early stage of an FTC investigation whether the conditions for mitigation are satisfied and what the litigation prospects are, and to establish a consistent response strategy.

D. Prior compliance system review is essential

Ultimately, the importance of preventive measures over post-incident responses has become even more pronounced. It is necessary to control the possibility of violations and the risk of repeated aggravation in advance through prior legal review of transaction structures and contract terms, regular compliance training, internal reporting channels, management of violation history, and the establishment of an integrated group-wide compliance policy.

Law Firm Chungchul is composed of attorneys who have experience representing companies in investigations and reviews by the Fair Trade Commission in the areas of the Fair Trade Act, Subcontracting Act, Franchise Business Act, Large-Scale Distribution Business Act, and Agency Act, as well as experience representing the Fair Trade Commission and having the legality of its dispositions recognized by the courts. If you have any questions regarding compliance system reviews, response to FTC investigations, or review of fine calculations, please do not hesitate to contact Law Firm Chungchul.