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Ambiguity in New Law Can Hinder Businesses

Posted September. 06, 2007 07:28,   


It is confirmed that Fair Trade Commission (FTC) is pushing for a law that can nip businesses’ efforts to develop technologies or reduce costs in the bud.

On September 5, it is said that FTC announced a fair trade law amendment that strengthens criteria for price abuses by market dominating companies and collected opinions on September 3.

The FTC plans to implement the amended law from November 4 after having the Regulatory Reform Committee and the Ministry of Government Legislation review the law.

The amendment newly set up two more cases that should be deemed as price abuses by market dominating companies: product prices that are excessively higher than supply costs, and product prices or margin of profits that are excessively higher than those of other companies in the same industry.

The current law regards cases where product prices are heightened too much or reduced too little as price abusing behavior.

Business groups are strongly against the new law, calling it populism that flies in the face of market principles or a change for the worse. Some government offices are also saying, “There is a problem with the new amendment.”

When the amended law takes effect, companies with large market share can be in conflict with the law when they cut costs through technology innovation even without increasing their product prices.

One official working for a business group said, “Who wants to invest in a new business or develop new technologies when the government disregards their cost-cutting efforts or tech-developing efforts and forces them to accept preset prices for their products? Eventually, the new act will do a disservice to those Korean companies that strive to survive in a highly competitive global market.”

A fair trade lawyer said, “Ambiguous expressions in the new law, such as ‘excessive’ or ‘normally,’ can give undue power to administrative offices.”

The FTC responded to these concerns by saying, “Even though the period for legislative announcement is over, we plan to consult more with business groups and civic organizations before submitting the final version to the Regulatory Reform Committee.”

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