hankyoreh

By Kwak Jung-soo, business correspondent

The Fair Trade Commission (FTC) has been called the “prosecutors for the economy,” but its role in guarding the market economy now appears to be in question.

The organization is said to be focusing too much on winning favor with President Park Geun-hye - who has made “economic revival” rather than economic democratization into her top policy goal - and not enough on its primary purpose of investigating unfair corporate practices. Some are even describing the situation as a return to the “dark days” early in predecessor Lee Myung-bak’s administration, when pro-business policies led the FTC to investigate less aggressively.

On Dec. 1, the FTC came out with a plan for a “citizens’ review commission” of outside experts to look at cases where an examiner conducting preliminary investigations arbitrarily decided to drop charges or let companies off with a warning without a committee review. The aim was to improve transparency and fairness in enforcement of the law.

But the fact that authority to present cases is held solely by the examiners in question has many critics calling the plan for a “citizens’ review commission” an empty gesture. Their argument is that no examiner would be “stupid enough” to have the commission look into a case where he or she dropped charges, which might raise questions about excessive leniency.

The commission is modeled on a similar one introduced by prosecutors in 2011. But the FTC has admitted that the prosecutors’ version has failed to produce any results in the past two years.

Most observers agree that FTC chairman Noh Dae-rae is largely to blame for the crisis. Noh is generally being seen as inconsistent, talking publicly about ensuring a fair market economy and economic democratization while actually shying away from investigations for fear of upsetting the President. Recently, he shocked the organization by saying in a press interview that he was “not going to increase the number of ‘catch-companies-off-guard’ ex officio investigations in 2014.”

The FTC has two main duties: improving the law to ensure a fair market economy, and investigating and sanctioning improper practices by companies. There are also two types of investigations: those initiated based on complaints from the public, and ex officio investigations, in which the FTC identifies and investigates illegal acts. Most of the big investigations fall in the ex officio category.

“The chairman himself is rejecting the FTC’s role and calling his own investigators people who ‘catch companies off guard,’” said one FTC official on condition of anonymity.

The organization said Noh’s remarks were a reflection of the recent situation.

“We’ve been focusing this year on improving the system [for economic democracy], and there have been so many investigation requests recently that we’ve gotten behind in processing them,” it explained.

But Noh himself has expressed that he wants to reduce the number of ex officio investigations, which companies loathe.

“I don’t intend to deny that we’re cutting back on ex officio investigations this year,” he said. “And we may have the lowest number of ex officio investigations [in history] next year too.”

According to Saenuri Party (NFP) lawmaker Sung Wan-jong, a recent parliamentary audit showed the FTC conducting just 59 ex officio investigations this year (as of October), or about one-third the annual average of 217 for the preceding five years.

Sources in and around the FTC said Noh’s passivity only increased in the second half of the year when Park stated that economic revival rather than economic democratization would be the administration’s top priority. In early July, Park said in a meeting with senior representatives from media outlets that the legislative process for major economic democratization bills was “almost finished.” In late August, she told the leaders of the country’s top ten chaebol, “we cannot let economic democratization turn into excessive regulation or a way of strangling big business.”

Around the same time, Noh sent a message to senior FTC officials emphasizing “strategic thinking.”

“Basically, he was telling us to work with the president’s goals rather than focusing on laws and principles,” said an FTC source on condition of anonymity. “There were even orders from the top to refrain from [ex officio] investigations on companies with lots of exports.”

Some are saying the FTC’s other duties are also suffering. Last month, a local office was planning not to even accept complaints about unfair practices by Samsung, agreeing to do so only after the press reported on the situation.

Slap-on-the-wrist punishments have been a frequent occurrence. In late August, Hyosung Group was let off with a warning for failure to notify the FTC of their affiliates. In mid-September, an exception to the cross-shareholding ban was granted to Kumho Industrial for its circular investment.

The FTC also has yet to disclose any current chaebol governance structure data, something it had done annually in the past. Analysts said this may be tied to the scuttling of a commercial code amendment to improve that structure due to chaebol objections.

The FTC said it plans to focus on improving the law and systems this year and on enforcing them next year. But it has also opened itself up to charges of undermining its own regulations. In the case of regulations on chaebol work funneling practices, considered the main achievement in economic democratization legislation, the list of exceptions was broadened - too far, critics said - during the process of amending enforcement decrees.

“There were high hopes from Noh when he took office, since he was an economic official with drive and ability,” said an FTC official on condition of anonymity. “Seven months later, he seems to have let a lot of people down.”

Another official said the situation is one where mid-level executives “can’t say what they need to because the vice chairman and standing committee members are about to be announced and they want to be on the chairman‘s good side.”

Fair trade experts said that as the institution in charge of corporate regulations, the FTC has a greater need for policy consistency than other agencies.

“To get consistent enforcement of the law without the FTC chairman looking to the President for cues, we first need independence in the appointments there,” said Kim Sang-jo, Hansung University professor and director of Solidarity for Economic Reform. “That means replacing the current system where the chairman nominates standing committee members and the president appoints them to a system where recommendations are given by the National Assembly and different parts of society.”

Indeed, this approach has already been adopted by the Monetary Policy Committee and Korea Communications, both council systems along the lines of the FTC.

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