Enterprises Locked in Ongoing Litigation Struggle with FTC

The “S” company, an apartment construction firm, received orders from the Fair Trade Commission (FTC) in January 2001 to pay a 2.1 billion won fine on the charge of supporting a subsidiary company wrongfully.

The reason for the fine was that in the course of selling shares of “D” company, an unlisted subsidiary, back to “D” company to settle debt guarantees between the subsidiaries, the shares were sold at a much lower than reasonable price.

“S” company appealed, and as the plaintiff, it won the appeal four years and four months ago this May, but the FTC appealed, so the company is currently waiting for the Supreme Court’s decision.

Another “S” company, a finance company, was fined 327 million won by the FTC on charges of giving unfair support to its parent company by handing over the company’s shares. This followed a MOU (memorandum of understanding) to sell assets that had nothing to do with the business in the course of inducing foreign capital right after the foreign exchange crisis in 1997.

The high court ruled in favor of “S” company this January, but with the appeal from FTC, this case is also pending at the Supreme Court.

The problem is that even if the FTC loses the cases at the administrative litigation level (high court), the decisions are appealed most of the time, and companies caught by FTC will have to go through a “waiting war” for three to four years until a final judgment is made by the Supreme Court.

According to a report on “pending administrative litigations by the year” that FTC turned in on Thursday to lawmaker Lee Keun-sik (Uri Party), a member of the National Policy Committee, a total of 195 cases were filed since 2001, and 137 (of which 103 cases were related to fines) were still pending in court. Some 94 cases, approximately 69 percent, were long-term lawsuits, pending for at least one year in court.

There are 103 cases, which are still in progress where enterprises appealed the FTC’s imposition of fines, and these amount to some 352.43 billion won. A total of 76 percent of these cases, 73 cases, are being heard at the Supreme Court.

Among the 73 cases that the high court ruled on, the FTC won only 28, while enterprises won 27 cases, and 18 were partly won. Since 2001, 61 percent of the total cases reversed FTC’s decisions by appeal.

An executive of “A” company spoke out, saying, “During the three to four-year course of the lawsuit, the image of the company was damaged, not to mention the huge material and moral business losses suffered.”

Lawmaker Lee pointed out, “The fact that many of the FTC’s decisions are overturned at court shows that authorities are abusing their power or making unreasonable judgments.”

On this matter, a FTC official said, “In order to eradicate unjust and unfair acts by enterprises, a fining system is necessary. If an unfair situation arises, it can be rectified in court by filing a lawsuit.”

Young-Hae Choi yhchoi65@donga.com