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FTC`s ill-advised decision to reduce fines

Posted February. 23, 2001 19:16,   


Four months ago, the Fair Trade Commission (FTC) imposed 190.1 billion won in fines on the nation`s five oil refineries on charges of illegally colluding in the course of bidding on military supply contracts. It has now decided to reduce the amount by more than one-third. The FTC said the decision was made in light of the oil companies` financial capabilities and the additional indictment of six executives and two of the five refineries. However, the 36.3 percent reduction in fines is beyond the legally allowed discretional authority of the commission. The FTC said when it imposed the heavy fines that such a serious criminal act should be harshly punished. This is to say that the commission brandished a great sword when public condemnation was at its height but withdrew the sword when the case had dropped from the public consciousness.

The law provides that the commission should impose fines on delinquent firms based on any violations of the law that they commit, their frequency and the amount of profits they earn through illicit acts. In addition, detailed criteria regarding the imposition of penalties are clearly stipulated. In light of the regulations, the commission`s decision to reduce the original 190 billion fine by 69 billion won was incongruous and aberrant.

The FTC said it took into account the prosecution`s indictment of six executives of the five refineries, who were in charge of bidding for military supply contracts, but failed to admit that it erred in failing to lay charges against the delinquent figures and corporate refineries in the first place. Also to be noted is that the administrative penalties were clearly not as harsh as the criminal punishment. The commission reasoned that it took into account the oil companies` financial capability amid the ongoing business slump, yet does this mean that if the businesses recover, the full fine would be reimposed? The problem could be easily resolved by allowing the companies to pay the fines in installments.

The companies` illicit deals on military supply contracts are tantamount to stealing taxpayers` money. These particular oil-refining firms secretly decided who would be the successful bidders for military contracts, taking on the contracts in rotation. Last year, the refineries made exorbitantly high bids for contracts and were turned down on nine occasions. Moreover, the FTC announced plans to investigate suspicions that the refineries` made illicit agreements on oil prices but ended up reneging on its promise.

As a matter of course, the FTC`s fair trade probes should not be harsh enough to hamper the sound business activities of those subject to investigations, yet they must result in the meting out of stringent penalties when wrongdoing is uncovered. It is open to debate whether the FTC, a sort of watchdog for irregular business practices, has done its job properly.