Seoul to take class-action suits against cartels

The Fair Trade Commission unveiled its policy to take stern disciplinary measures against conglomerates for their irregular business practices during its report to President Park Geun-hye on Wednesday.

The antitrust regulator, which has already pledged to crack down on unfair intragroup trading among conglomerate-based affiliates, said it would also introduce the system of class action lawsuits by pushing for a law revision in June.

“Enterprises including financial firms engaging in cartel practices will be the main target of the coming class action system,” the FTC said in its paper for the policy briefing.

Like the nation’s securities-related class action system, policymakers are benchmarking the cartel-related lawsuit system of the United States.

Price fixing among big firms has been rampant in the local market despite a series of fines and administrative penalties from the FTC on rule violators.

“About 43 percent of price-fixing cases over the past three years will be the target of the coming class action,” said the regulator.

It estimated that 45 million consumers of life insurance firms will be allowed to file damage claims, as well as 25 million of the soju makers and 24 million for the dairy product industry.

For the crackdown on irregular intragroup trading, the FTC plans to reestablish the special department in charge of investigation into family-owned business groups, such as Samsung, Hyundai Motor, SK and LG.

The FTC did not operate the chaebol-crackdown department during the Lee Myung-bak administration, which had adopted a “business-friendly” policy.

While the regulator plans to enhance oversight of conglomerates’ lopsided funding among their subsidiaries in a bid to protect small and mid-sized subcontractors, it has decided not to introduce the so-called “30 percent rule.”

The FTC had sought to reprimand chaebol owners who hold more than a 30 percent stake in a business unit engaging in unfair intragroup funding.

Thanks to the scrapping, chaebol-based owners of 112 subsidiaries of 22 business groups such as Samsung Everland and Hyundai Glovis could evade closer supervision of the FTC.

President Park has vowed to root out unfair practices committed by large companies against small ones. She also said her administration will improve the corporate governance structure of chaebol to prevent their monopolistic behavior and illicit wealth transfer to owners.

By Kim Yon-se (kys@heraldcorp.com)