FTC and Business Circles Collides over Extension of the Account-tracking Right

The Fair Trade Commission (FTC) decided to extend the time limit of the account-tracking right, which allows for the claim of information on financial transactions in corporate investigations.

This will raise confrontation between the government and the business circle as the business community, declaring all-out war against the government plan, expressed strong opposition.

The FTC announced yesterday that the finalized bill on fair trade would be approved by the legislators on August 20. The bill focuses on the time-limit extension of the account-tracking right as well as prohibition of mutual financing between subsidiaries of a holding company.

The FTC before moved ahead with its plan to attach the provision permanently securing the account-tracking right to the revision bill on fair trade, but had to back off during negotiations in the face of opposition from others including the Ministry of Finance and Economy (MOFE). The account-tracking right was to expire in its implementation by February, 2004. And the FTC finally settled for the five-year extension of the right.

“The account-tracking right is definitely necessary considering 87% of insider-trading occurs through financial institutes”, said the FTC Chairman Kang Chul-kyu, adding, “The five-year extension was decided after consulting with officials, such as Deputy Prime Minister for Economy Kim Jin-pyo.”

To this, Hyun Myung-gwan, the Vice President of the Federation of Korean Industries (FKI) expressed fierce opposition, saying at a conference during the day at the FKI building, “The business community will fight with determination against the time-limit extension of the right, which was granted temporarily during in the nation‘s financial crisis.”

In the meantime, the FTC made up its mind to forbid any kind of mutual investment between subsidiaries, which has been allowed by the existing laws, while proposing a supportive measure for holding companies, including the two-year extension of deadlines for a holding company to fulfill its obligation to meet the required debt-equity ratio.

At the same time, the FTC doubled the penalty for illegal collusion between firms to 10% of the accused company`s revenue or up to 2 billion won.

Additionally, the deadline for reporting the integration of firms through acquiring equities is changed to before the transaction. As a way of protecting customers, an individual is allowed to file a lawsuit against a business for unfair practices even before the FTC issues a disciplinary order.

Improvement measures on the limitation on the excessive investment, which has been at the core of public attention, were not included in the revision bill.

koh@donga.com smhong@donga.com