FTC Will Enforce Report-Award System Starting Next Month

If you report a company for increasing its prices via collusion to the Fair Trade Commission (FTC) starting next month, you can earn a reward of up to one billion won.

You can earn a reward of up to 30 million won if you report those departments, discount stores, and TV home-shopping firms that returns a good without a just reason or force their lessees to open bargain sales.

The FTC will also grant a maximum of five million won in reward money for those who report newspaper distributors who give out excessive free gifts or papers.

Experts pointed out that the FTC has a high chance of making arbitrary interpretations because the FTC is set to figure out the amount of a reward according to the degree of the violation and the cogency of the evidence.

How Will the Report-Award System Be Run?-

According to "Award Money Rules for Reporters of Fair Trade Law Violations" which the FTC announced yesterday, the FTC will pay reward money to those who report the following five violations with corroborative facts starting April 1: unfair joint action (collusion); unfair support; violation of notice of large retailers; violation of newspaper sales notice; and rules concerning business organizations.

The reward money will be paid after a violation is actually decided, and if there are multiple-reporters, it will be given out only to the first person who turned in corroborative facts.

The FTC will first calculate the standard money according to its sanction level, including fines, correction orders, and warnings, and then classify submitted evidence into high, middle, or low categories and pay 80-100 percent, 60-80 percent, and 40-60 percent, respectively, as reward money.

The ceilings for each reward are: one billion won for unfair joint action; 100 million won for unfair support; 30 million won for violation of notice of large retailers; and 25 million won for violation against business organization rules.

The ceiling of reward money concerning violation of notice of newspaper sales is 30 million won for supportive acts by the head office and five million won for providing free gifts and papers or forcefully distributing them, in which the degree of violation can be measured in money objectively.

Is It Flawless?-

The FTC explains that the report-reward system is designed to expose stealthy violations against the fair trade law, but experts point out that it has problems.

First, it is highly likely that the FTC may make arbitrary interpretations because it is set to figure out reward money according to the degree of violation and the cogency of evidence.

For example, the FTC will decide the amount of reward money by calculating the amount of money equal to the free gifts and papers given out that surpasses the annual subscription fee for the newspaper by 20 percent, and multiply that by five to 50 times depending on the sanction level and cogency of evidence.

Furthermore, the report-reward system may promote illegal acts as the FTC has decided to accept corroborative facts gathered by illegal acts like larceny and wiretapping.

An FTC official explained, "Illegal acts committed while securing evidence requires a separate judgment by the court, so it is a separate problem from the FTC`s reward system. Yet if the system indeed promotes illegal acts, we will review it once again."

Chi-Young Shin higgledy@donga.com