Cartel whistleblowers lose full immunity once probe begins under proposed rule changes

Companies that come forward to report cartel activity after a probe has already begun will no longer receive full immunity from surcharges under proposed rule changes. First-in whistleblowers who report before an investigation starts will continue to receive full immunity, but those who report after a probe begins will have their surcharges reduced by only 75%, leaving them liable for the remaining 25%.

Penalties for repeat offenders will also be tightened. Companies that engage in cartel activity again after five years but within 10 years of a previous violation will see their leniency benefits cut in half.

The Korea Fair Trade Commission announced Wednesday that it will open a legislative notice period for proposed amendments to the enforcement decree of the Fair Trade Act, running from Wednesday through Nov. 2, while a separate administrative notice period for proposed revisions to the leniency guidelines will run through Oct. 13.

The proposed amendments introduce a tiered leniency structure based on when a company comes forward. First-in whistleblowers who report before an investigation begins will retain full immunity from surcharges, while those who report after a probe has started will receive only a 75% reduction. Under current rules, first-in whistleblowers receive full immunity regardless of whether they report before or after an investigation begins.

The Fair Trade Commission said the timing of a report affects how much it contributes to resolving a case, and that offering identical benefits regardless of timing could give companies an incentive to maintain a cartel until just before a probe is launched. The change is intended to encourage earlier reporting, enabling faster detection and quicker dismantling of cartels.

Restrictions on leniency for repeat offenders will be tightened in both scope and duration. Companies that form a new cartel more than five years but within 10 years after a previous violation will have their leniency benefits cut in half. Specifically, first-in reporters before a probe begins will receive a 50% reduction, first-in reporters after a probe begins will receive 37.5%, and second-in reporters will receive 25%. The change closes a gap in the existing rules, under which repeat violations occurring more than five years after a prior offense were not subject to leniency restrictions.

The amendments also extend repeat-offender restrictions to new cartels formed in business sectors different from the one in which the original violation occurred. A requirement that the new violation breach the same corrective order as the original has been removed, meaning leniency restrictions can now apply to any company caught in a new cartel, regardless of the business sector involved. The change is designed to prevent companies operating across multiple sectors from exploiting the narrower leniency criteria.

In addition, the restrictions will apply to companies that have taken over cartel-related business operations through mergers, splits, spin-off mergers or business transfers. The revision addresses a previous ambiguity in which it was unclear whether leniency restrictions applied when a company with a cartel history transferred its business and then repeated the offense through a newly established entity.

The amendments also clarify the definition of a "new violation" to include cases where a company, after receiving sanctions or leniency, agrees to or carries out a new cartel, or continues an existing one. The clarification is intended to improve predictability for whistleblowers.

The commission said it will review opinions submitted by stakeholders and relevant government ministries during the notice periods, and complete revisions to both the enforcement decree and the leniency guidelines by the first quarter of 2027, following a review by the Ministry of Government Legislation.