[Viewpoint] Consent decrees: Worth considering

In an increasingly complex and globally integrated Korean marketplace, the need for a competition authority which is both responsive to market conditions and vigilant in its enforcement of consumer protection is greater than ever. The Korea Fair Trade Commission (KFTC) has garnered significant positive attention worldwide for its tireless efforts to promote consumer protection and eliminate what Korean regulators perceive to be harmful anticompetitive business practices.

Many companies subject to the KFTC’s investigations have suggested that the process could be made less burdensome, time consuming and opaque for the benefit of all parties. KFTC regulators themselves face an enormous backlog of uncompleted investigations, thus making it difficult to provide injured parties with timely relief or to give each investigation its due attention.

In pursuit of a balance between enforcement and efficiency, the National Assembly would be prudent to consider the introduction of a consent decree, which is commonly used in other countries but heretofore unknown in Korea, to resolve disputes arising under the Monopoly Regulation and Fair Trade Act (MRFTA).

A consent decree, otherwise known as a stipulated or agreed judgment, is a final, binding judicial decree or judgment memorializing a voluntary agreement between parties to a lawsuit in return for withdrawal of a criminal charge or an end to a civil litigation. In a typical consent decree, the defendant has already ceased or agrees to cease the conduct alleged by the plaintiff to be illegal and consents to a court injunction barring the conduct in the future.

A consent judgment can also memorialize payment of damages. Sometimes the defendant expressly does not admit to fault, illegality or damages, enabling the parties to reach agreement more quickly. While consent decrees are used most commonly in criminal or family law disputes, their use in competition law matters is increasing as well.

Recently, the U.S. Federal Trade Commission (FTC) has announced consent decrees with a number of prominent multinational companies. In conjunction with some of these decrees, the companies agreed to make funds available for consumer refunds directly from the FTC. These decrees enabled both the FTC’s regulators and the defendant companies to avoid the costs and difficulties of a protracted investigation and provided immediate access to relief for customers without the need for expensive and intimidating litigation.

Because consent decrees are currently unavailable in Korea, a respondent company facing a KFTC investigation has few alternatives to resolving potential legal exposure other than enduring a long and unpredictable inquiry until the issues are ultimately adjudicated by the KFTC’s commissioners - a process which may take several years and cost millions of dollars to defend.

Introducing a consent decree remedy in Korea similar to the system practiced in the U.S. and elsewhere would yield immediate benefits. The KFTC would be able to enforce competition and consumer protection laws quickly and efficiently, and make compensation directly available to consumers. Although Korean consumers can file civil lawsuits to recover damages suffered as a result of a breach of the MRFTA, the absence of class actions and the lack of legal experience or awareness among Korean consumers render the pursuit of such claims practically difficult.

Once a consent decree is implemented, KFTC investigators could substantially reduce the amount of time spent on consumer protection issues and instead focus their increasingly scarce resources on more pernicious and complex forms of anticompetitive behavior, such as cartels. Companies whose conduct has raised concerns under relevant consumer protection laws but wish to bring the process to a fair and prompt resolution will be able to bring investigations to a much swifter and more cost-effective conclusion via a consent decree without a formal admission of wrongdoing and with minimal disruption to their businesses. The risk of prolonged litigation is a very serious concern for foreign investors seeking to do business in Korea, which has a civil law system that is very difficult for foreigners to navigate.

In Korea, it is the public prosecutor who decides whether to pursue a criminal investigation. Whether the prosecutors’ office would be a party to the consent decree, and whether the consent decree would or could necessarily include immunity from prosecution, are issues that would require careful discussion among the interested parties. Providing a transparent and efficacious system for resolving consumer protection issues may help Korea compete for foreign investment capital more effectively. A consent decree mechanism would enable Korea to tout its world-class legal system as one of its many competitive advantages, along with (among others) its skilled workforce and advanced technology infrastructure, to substantiate a renewed effort to woo skeptical and risk-averse foreign investors. With recent media reporting suggesting that foreign direct investment is currently lagging behind that of far smaller and less developed countries, the need for measures aimed at attracting additional foreign investment into Korea could not be more clear or urgent.

*The writer is a foreign legal consultant in Seoul whose specialties include antitrust and competition law.

By Patrick Monaghan