[Editorial] Repeated collusion should lead to cancellation of registration, but such a powerful measure requires caution

The Democratic Party of Korea and the government announced on the 28th that they would strengthen sanctions against collusion, including canceling the registration of businesses that repeatedly engage in collusive conduct or suspending their operations. The stronger sanctions will apply to 17 fields, including safety, energy, transportation, and the environment. The DPK and the government said they would amend the Fair Trade Act and 17 individual laws.
As Joo Byung-ki, chair of the Korea Fair Trade Commission, said, "Collusion undermines the foundation of a market economy and is a serious unfair practice aimed at exploiting consumers and other economic actors for unfair profits." Collusion is a harmful practice that undermines people’s livelihoods and has proven difficult to eradicate. Prices should be determined in the market according to the principles of supply and demand, but when companies collude, consumers lose the right to compare prices and choose what to buy.
Every previous administration has cracked down on collusion, but none has managed to eradicate it because sanctions such as penalty surcharges were too weak. Since the gains from collusion outweighed the losses imposed by sanctions, companies repeatedly engaged in the same conduct after some time had passed, even after being caught. The DPK and government’s latest plan to strengthen sanctions can be seen as a powerful measure that would effectively force companies to shut down if they repeatedly collude.
Food products such as sugar and flour are among the most prominent areas of collusion affecting people’s livelihoods. According to data from the office of DPK lawmaker Yoon Joon-byung, the five cases of collusion among food companies uncovered this year involved combined sales of 14.9866 trillion won. The Korea Fair Trade Commission imposed total penalty surcharges of 1.8178 trillion won on the companies, equivalent to 12.1% of their sales.
Sugar producers and flour-milling companies were caught colluding between 2006 and 2007, but collusion involving them was uncovered again this year. The paper industry also engages in collusion every few years, and collusion frequently occurs in student goods such as school uniforms. However, the food and paper industries were excluded from the 17 laws covered by the latest plan. The Korea Fair Trade Commission explained, "This time, we selected 17 sectors that were agreed upon with the relevant ministries from among industries that require registration or permits in practice." Since these industries are central to collusion affecting people’s livelihoods, failing to add them later could create an issue of fairness.
Collusion is certainly an unfair practice that must be eliminated, but cancellation of registration concerns a company’s very survival. Therefore, extremely strict standards are needed whenever a company is found to have colluded. Severe punishment is warranted for collusion in the food industry, which is directly linked to what people eat. However, companies sometimes plead that paying even a penalty surcharge all at once would deal a fatal blow to their operations.
Although a penalty surcharge equivalent to 12.1% of sales may not seem low, it would not be a small figure compared with the profits gained through collusion. The Korea Fair Trade Commission, which imposed the penalty surcharges, may lower the amounts itself in consideration of the companies’ circumstances.
Whatever the reason, collusion is a crime that harms people’s livelihoods and must never happen again. If companies believe the penalty surcharges are excessive, they should simply refrain from colluding. Nothing more needs to be said. Companies protest by asking whether even the exchange of price information constitutes collusion, but they should also refrain from and exercise caution over such conduct.
At this point, corporate lobbying through law firms to seek reductions in penalty surcharges should also disappear. If penalty surcharges are imposed according to fair standards and repeated conduct leads, without exception, to the suspension of a company’s management and operations, collusion will eventually disappear. However, because these sanctions would be unprecedentedly severe, the legislative process must include sufficient consultation and a thorough gathering of opinions. The views and claims of the industries concerned must not be ignored.