What I Ask of the Korea Fair Trade Commission

Changkyu Choi 

Professor Emeritus of Economics, 

Myongji University

<Table of Contents>
1. Introduction: It Is the Referee’s Seat, Not the Scholar’s Views, That Is at Issue
2. Market Share and Market Power Are Not the Same
3. Government-Created Restraints on Competition: Tariffs and Positive-List Regulation
4. Schumpeterian Dynamic Competition Must Not Be Overlooked
5. Economic Evidence Must Take Precedence over Preconceptions about Chaebol
6. Neutrality of the Referee: Prior Statements, Investigations without Clear Standards, and Divergent Court Rulings
7. The Coupang Case and Trade Risks
8. Competition Policy Needs a Change in Direction
9. Conclusion: Protecting Competition or Protecting Competitors?

1. Introduction: It Is the Referee’s Seat, Not the Scholar’s Views, That Is at Issue

At the National Assembly audit on October 12, Korea Fair Trade Commission (KFTC) Chair Joo Byung-ki was asked about a statement he had made as a professor, in which he identified chaebol as principal actors in an “exploitative Korea.” He replied, “The expression was excessive, but I still think that way.” In response to criticism that he was anti-business, he said that businesses are the main players in a market economy and that the KFTC serves as the referee.
The issue is not the views he held as an academic, but the position now occupied by someone who continues to hold those views. The KFTC concentrates within a single institution the authority to investigate, adjudicate, and impose sanctions. As long as its chair continues to view certain business groups as agents of exploitation, there is no institutional guarantee that such a perception will not influence which cases are selected or how aggressively they are investigated. Trust comes not from calling oneself a “referee,” but from standards and procedures.
To be sure, unfair intra-group transactions, private benefit extraction by controlling shareholders, and the exclusion of competitors must be strictly regulated. Nor can it be denied that the Monopoly Regulation and Fair Trade Act includes the curbing of excessive concentration of economic power among its objectives. But the fact that a company is large is not the same as evidence that it has restricted competition. This article examines, in turn, the economics of market power, government-created restraints on competition, and procedural fairness in enforcement.
Competition policy should first ask not how large a company is, but how much competitive pressure it actually faces. At the same time, it should examine whether the enforcement authority itself acts in a predictable manner.

2. Market Share and Market Power Are Not the Same

Market share is the starting point for assessing monopoly power, not the end point. Market power is the ability to raise prices or reduce output while remaining substantially free from competitive pressure. Even a company with a 70?80 percent market share may have limited market power if consumers can easily switch to alternative suppliers.
The Korean automobile market provides an example. If a 5 percent increase in the price of domestically produced cars leads to a 20 percent increase in demand for imported cars, the cross-price elasticity is 4, indicating a high degree of substitutability. What matters is not the current share of imports, but how quickly consumers switch when prices rise.
Price elasticity, substitutability, import competition, and the possibility of new entry therefore need to be considered together. In industries such as semiconductors and automobiles, which compete in global markets, domestic market share alone is an inadequate basis for assessment. Even within semiconductors, DRAM, NAND flash memory, and high-bandwidth memory (HBM) serve different purposes and are not readily substitutable for one another. Competition should therefore be assessed product by product rather than by grouping everything into a single “semiconductor market.”
Competition authorities in the United States, Japan, and the European Union also consider import competition and potential entry, and Korea’s own review standards contain similar provisions. The real question is not whether such standards exist, but how faithfully they are applied in actual enforcement.

3. Government-Created Restraints on Competition: Tariffs and Positive-List Regulation

Any discussion of monopoly and oligopoly must also take government trade policy into account. Tariffs and non-tariff barriers protect domestic industries, but they can also weaken foreign competition and increase the pricing power of domestic firms.
If a domestic company holds 80 percent of the market largely because of high tariffs, lowering import barriers and inviting greater competition may be a more fundamental remedy than regulating the company’s conduct. Of course, tariffs may serve separate objectives such as industrial security and trade negotiations, and the existence of tariffs does not justify collusion.
Still, it is necessary to distinguish whether restrictions on competition arise from corporate conduct or from barriers erected by the government. If the cause is left untouched while only the resulting market concentration is criticized, policy becomes self-contradictory.
The same applies to positive-list regulation. Under a system in which activities are prohibited in principle unless specifically permitted by law, new business models may be prevented from entering the market simply because no explicit legal basis exists for allowing them. In such cases, the market power of incumbent firms may result not from superior competitiveness, but from institutional protection.
For new technologies and emerging industries, Korea should actively consider expanding the use of a negative-list approach, under which activities are permitted in principle unless specifically prohibited. Regulation can, however, remain in place in high-risk areas where accidents could cause severe harm, such as life and safety, the environment, and financial stability.
If the KFTC places importance on promoting competition, it should scrutinize government-created restraints on competition just as closely as it regulates corporate market power. This is not deregulation for its own sake. It is competition policy aimed at bringing potential competitors into the market.

4. Schumpeterian Dynamic Competition Must Not Be Overlooked

A more fundamental limitation of market-share-centered analysis is its difficulty in capturing dynamic competition driven by technological innovation.
Joseph Schumpeter argued that the essential form of competition under capitalism is not price competition among existing firms, but “creative destruction,” in which new products, technologies, and business models overturn existing market structures.
Google dominated the search market for many years, but the rise of generative AI has led users to increasingly turn to conversational AI. It would be premature to conclude that search has been completely displaced, but it is clear that new technologies can redraw the boundaries of existing markets.
A company with a 90 percent market share may see its dominance erode rapidly with the arrival of new technologies and new entrants. Conversely, a company with a relatively low market share may still exercise substantial market power if it controls a critical technology or an essential distribution channel and uses that position to block entry.
That said, vague expectations that new technologies may emerge someday cannot justify anticompetitive conduct today. Taking dynamic competition into account does not mean abandoning antitrust regulation. It means regulating more accurately.

5. Economic Evidence Must Take Precedence over Preconceptions about Chaebol

Large business groups can generate efficiencies through economies of scale, internal capital markets, and large-scale research and development. In industries such as semiconductors, automobiles, shipbuilding, and batteries, which require enormous amounts of capital and long-term technological development, a business group’s ability to coordinate resources can itself become a source of international competitiveness.
At the same time, intra-group transactions can be used to extract private benefits or exclude competitors, and such conduct should be regulated in accordance with the law.
The key is to distinguish between different types of conduct. Transactions among affiliates that reduce transaction costs and improve quality control are different from transactions conducted on unfair terms to transfer benefits to controlling shareholders. The existence of scale or intra-group transactions alone does not establish anticompetitive conduct. A view of business should therefore rest on concrete evidence and legal standards rather than generalized value judgments.
Consider an analogy. Would it be reasonable to place a large person under special surveillance simply because his size supposedly makes him more likely to harm others, while excluding a smaller person from such scrutiny? Being large does not mean that one harms others, just as being small does not mean that one does not. The law should monitor harmful conduct, not physical size.
Consistency in standards is another issue. If size itself is the source of risk, then large public enterprises such as Korea Electric Power Corporation should be subject to the same standard. Yet under the Enforcement Decree of the Monopoly Regulation and Fair Trade Act, business groups whose “same person” that is, the entity exercising de facto control is a public institution are excluded from designation as large business groups. In effect, the standard for risk changes according to who owns or controls the entity rather than according to its size.
International competition also cannot be ignored. A company that appears large in Korea may be competing against far larger giants in the global market. If ex ante regulatory burdens are imposed solely on the basis of domestic asset size, while much larger foreign competitors in the global market are not subject to the same rules, a law intended to promote competition may paradoxically hinder investment and innovation by Korean firms.
When judged by evidence, the term “exploitation” is political rhetoric unless it can be substantiated through measurable indicators such as prices, quality, investment, or employment. In academia, such a proposition may remain a hypothesis. But when the head of an agency vested with sanctioning authority continues to hold an unproven premise, that premise itself becomes a risk factor in enforcement.
The credibility of fair trade policy does not depend on how strongly the authorities speak about large corporations. It depends on how objectively they identify anticompetitive conduct and how consistently they apply the rules.

6. Neutrality of the Referee: Prior Statements, Investigations without Clear Standards, and Divergent Court Rulings

Enforcement procedures also became an issue during the parliamentary audit.
When questioned about having discussed a pending case in a broadcast interview before the Commission had reached a decision, the Chair acknowledged that his remarks could have been misunderstood and said he would take care not to appear biased. Whatever the explanation, when a case is publicly discussed before deliberation and decision, it can create the impression that the referee has announced the outcome in advance.
Enforcement without clear standards is also problematic. In connection with investigations into trademark royalty payments, concerns were raised that no standard existed for determining an appropriate level. The Chair replied that guidelines were being prepared. If investigations begin before standards are established, companies cannot predict whether their conduct is lawful or unlawful. As investigative powers are strengthened, corresponding safeguards and checks should also be discussed.
Court decisions have also differed. An on-site investigation of Coupang was temporarily suspended by court order, after which the court dismissed Coupang’s application. Reports have also indicated that stays of enforcement were granted in some other cases. Since the specific grounds for these rulings have not been disclosed, no definitive conclusion can be drawn in either direction. But even if an investigation resumes, questions concerning the legitimacy of the standards and procedures do not disappear.

7. The Coupang Case and Trade Risks

Coupang’s refusal to cooperate with an on-site investigation cannot be justified. Lawmakers from both the ruling and opposition parties criticized the company, and nationality is not a ground for exemption from law enforcement.
The issue is the manner of enforcement and its consequences. Opposition lawmakers have argued that the Chair’s discussion of a possible business suspension before the investigation triggered a backlash in the United States, but no direct causal connection between the two has been established.
What can be confirmed is that both Republican and Democratic lawmakers in the United States have expressed concern about Korea’s response while referring to nondiscrimination commitments under the Korea-U.S. trade agreement. The U.S. side has reportedly regarded sanctions related to Coupang’s personal data breach as excessive. The Chair has stated that enforcement will be carried out regardless of nationality. No formal trade measure by the U.S. government has been confirmed.
Nevertheless, as long as the United States perceives the matter as discriminatory, prior public remarks by the Chair can increase the cost of trade friction regardless of his intention.
Moreover, Coupang is not a chaebol, so the case cannot be explained through a particular view of chaebol. Whether the company is a chaebol or a foreign-affiliated platform, the same principle applies: the issue is whether each case is decided on the basis of evidence and procedure, or whether preconceptions come first.

8. Competition Policy Needs a Change in Direction

For competition policy to function properly, Korea must move beyond an approach centered on corporate size and put the following five principles into practice.
First, market share should be used as a starting point, while price elasticity, substitutability, import competition, and the possibility of new entry are analyzed together.
Second, the government should review its own restraints on competition, including tariffs and licensing requirements, and expand the transition toward negative-list regulation in emerging industries.
Third, the authorities should assess technological innovation and the possibility of new competitors entering the market, while ensuring that vague expectations of future competition are not used to excuse unlawful conduct in the present.
Fourth, in regulating large business groups, the authorities should distinguish among concentration of economic power, private benefit extraction, restrictions on competition, and efficiency, and focus on conduct and competitive effects rather than asset size alone.
Fifth, enforcement procedures must be put on a sound footing. Public comments on individual cases should be avoided before a formal decision is reached. In areas where judgments may differ, such as trademark royalty payments, standards should be disclosed before investigations begin. Stronger investigative powers should be accompanied by appropriate safeguards, and in cases involving foreign companies, the authorities should transparently explain the legal basis and procedures while also taking potential trade implications into account.
This is not an argument for tolerating unfair practices. Conduct that genuinely restricts competition should be strictly sanctioned. The point is that enforcement must also command confidence by being predictable and legitimate.

9. Conclusion: Protecting Competition or Protecting Competitors?

In a market economy, competition is not a process of keeping companies below a certain size. It is a continuous process in which new firms enter markets, new technologies replace existing products, and consumers make better choices.
What the government should protect is not particular companies or an existing market structure, but the competitive process itself the process that allows free entry and innovation.
Here, “competitors” refers to particular businesses that face the risk of losing in competition: incumbent firms protected by the government, or rivals favored simply because they are smaller. Policies that preserve the positions of such firms instead of fostering competition that gives consumers better choices ultimately undermine competition itself.
The controversy revealed during the parliamentary audit over the KFTC Chair’s views of business should be examined from the same perspective. Unlawful conduct by large business groups must be regulated, but corporate size should not be equated with anticompetitive conduct. A referee should make decisions based not on the size of the players, but on evidence and procedure.
A company may be treated as a giant in the domestic market while competing against much larger giants globally. Is it truly fair competition policy to shackle such a company merely because of its domestic size?
The essence of monopoly is not the size of a company, but the absence of competition.
Whether it is a company or the government that restricts competition, identifying the actual source of the restraint and correcting it is the proper starting point for sound competition policy.