<4> Fair Trade FTC Strikes Back

Charging Fines for Three News Agencies-

(Case 1: In March 2005, the Fair Trade Commission (FTC) held a meeting to collect the opinions of press-related organizations concerning the reward-for-reporting system.

The Korean Association of Newspapers wanted to send a Chosun Ilbo sales staff member as a representative, but the FTC did not approve, saying, “It is not fair to the other newspapers.”

When the FTC did not accept the selection of Chosun Ilbo and Kyunghyang Daily as representatives, the Association ceased attending the meeting.

On the other hand, those organizations which have criticized major news agencies, including the Citizens’ Coalition for Democratic Media (CCDM) and the People’s Coalition for Media Reform, were invited to the meeting.

Case 2: An FTC inspector visited a Dong-A Ilbo branch in the southeastern area and asked it to show its documents and list of subscribers.

When the director, surprised by the unexpected request, asked for the reason, the inspector answered, “We received a report that you are enticing people to subscribe to your newspaper with free gifts.”

After searching through the documents, the inspector left, saying, “There are three teams which make reports regularly. But the system will dissolve once the current president’s term ends.”

A month later, another inspector at a branch in the southwestern area said, “’Newspaper paparazzi’ made 200 reports concurrently. It is impossible to inspect all of them.”

This is what has been happening all over the country after the FTC introduced the reward-for-reporting system in April 2005 in an effort to eliminate illegal free gifts and free newspaper offers.)

There have been ongoing debates on the Fair Trade Commission’s unprecedented all-directional inspection of newspapers.

In particular, some suspect that the FTC’s inspection is political as it is focused on specific newspapers which are critical of the current administration, including Dong-A Ilbo.

Hanyang University Mass Communication Professor Lee Min-ung pointed out, “The Kim Dae-jung administration put pressure on critical newspapers through administrative control within the framework of the existing system, but the current administration is taking economic control measures such as unequal distribution of advertisements to different newspapers and legal control measures such as reforming the standards for newspaper fair trade and making an unconstitutional newspaper law.”

Using “Standards for Newspaper Fair Trade” as Weapon-

After the Roh administration was launched, the FTC rushed to reform the “standards for newspaper fair trade.”

In March 2003, Lee Nam-ki, then-chairman of the FTC, said, “We will reform the standards for the newspaper fair trade so that we can take unfair trade cases into our own hands.” The standards were reformed two months later as the FTC had wanted. The standards were abolished in 1999 according to the government’s reform policy and resurrected in 2001 along with the government’s tax investigation of news agencies. However, the standards were still based on the newspapers’ self-regulation at that time.

The FTC conducted a large-scale investigation on the wrongful internal trading by newspapers in the days of the Kim Dae-jung administration. Dong-A Ilbo was fined 6.2 billion won, Chosun Ilbo and its affiliates 3.4 billion won, and JoongAng Ilbo and its affiliates 2.5 billion won.

At the launch of the Roh administration, the FTC withdrew its charge of fines, while Dong-A Ilbo requested an administrative judgment. By doing so, the FTC admitted that it could not win the case in court and that charging fines was an unreasonable measure.

The FTC’s introduction of the new standards was then interpreted as a move to put pressure on newspapers critical of the government through refined regulations.

The wrongful internal trading mainly applies to the internal affairs of newspapers, while the unfair trade acts apply to branches and subscribers.

Ongoing Debate on Equity-

The new standards tightened the FTC’s control of the headquarters as well as the newspapers’ branches. Especially, those critical of the current administration became targets.

For example, the three major newspapers – Dong-A, Chosun, and JoongAng – were fined 552 million won in total on the suspicion of offering free newspapers excessively this March.

The investigation was conducted as pro-Roh organizations, including the CCDM, made a report at the end of 2003 based on the 2002 statistics on the number of circulations of charged newspapers, which was published by the Korea Audit Bureau of Circulations. Dong-A, Chosun, and JoongAng were the only three newspapers that voluntarily reported their circulation numbers.

Four press-related groups, including the Korea Audit Bureau of Circulations, pointed out in their opinion sent to Chairman Kwon Oh-seung that charging fines to the three newspapers will be unfair when the offer of free newspapers is a general problem in the newspaper market.

In April 2005, the FTC’s local office in Daegu sent a survey form to Dong-A and Chosun subscribers to ask whether they had ever received free gifts as a condition of subscription.

It was pointed out that sending a survey form to subscribers unrelated to the investigation was over the limits.

Intentional Pressure-

The political intention behind the FTC’s measures against newspapers has been criticized since August 2004 when it was revealed that an officer in charge of the new standards at the FTC handed over a 55-page document to an Uri Party lawmaker.

It was named “New Operation against the Press” since the document contained analysis of each newspaper’s argument tone and the direction for press reform. The FTC explained that the document did not show its official opinion but rather the officer’s individual opinion.

Its decision to make a signature-seeking drive for the campaign against free gifts and free newspapers also caused a debate.

Political intention was suspected of the campaign targeting a particular medium. As the debate expanded, the FTC excluded the drive from the campaign.

The direction of the FTC’s press policy at the end of the current administration’s term can be inferred from what Chairman Kwon said at a lunch meeting with journalists on December 26 of last year.

Kwon said, “We will accept critical but constructive reports whatsoever, but we will respond to ill-willed reports in the same manner. We won’t be naïve from 2007 on.”

[99% of FTC Premium This Year is Relevant to Newspaper]

“While the regulation on the violation of Newspaper Sales Notification (newspaper notification, hereafter) is stipulated in detail, regulations on the violation of the notice on large-scale retail stores, and cartel are written in inexplicably difficult terms.” (an assemblyman)

“Newspaper notification is drafted in detail, but ….”(Vice President of Fair Trade Commission Kim Byeong-bae)

On June 29 at the conference room of the National Policy Committee of the National Assembly, the account settlement and examination of Fair Trade Commission (FTC)’s tax income and spending in fiscal year 2006 were being conducted.

At this meeting, some assemblymen pointed out that, “The regulations on the violation of newspaper notification are described very specifically compared to other systems of premium,” and asked, “Whether it isn’t too tilted toward newspapers.”

The premium is a system that pays premiums to those who report violations of the Fair Trade Act that are relatively difficult to detect such as the violation of newspaper notification, the violation of large-scale retail stores, cartels, and prohibited business group activities and unfair support.

Most of the premium paid, however, is concentrated on the violation of newspaper notification. This is why controversy is never calmed down on the equity of not only the premium system itself but also the administration of that system.

According to the evaluation report the National Policy Committee publicized after the revision of account settlement of FTC, one billion won was allotted as premium last year, of which 153.92 million won was actually paid as compensation.

Out of this amount the premium related to the violation of newspaper notification totaled 134.94 million won, or 88 percent of the total amount.

Such trend worsened further this year. As of the end of May, out of 199 million won paid as premium, 197 million won, or 99 percent, was related to the violation of the newspaper notification.

One of the causes, some explain, is that the maximum amount of premium was raised from five million won to 10 million won in May last year in order to further activate the premium system related to newspaper notification.

This report highlighted the defect in FTC’s administration of premium system, saying, “The negative influence of cartel or prohibited business group activities on the competitive market environment cannot be said to be weaker than that of the violation of newspaper notification.”