The Korea Fair Trade Commission's fine collection rate fell below 50 percent for the second consecutive year on a settlement basis, raising concerns that the effectiveness of its penalty regime could weaken unless collection improves — even as the agency is on track to impose a record-high total in fines this year.

According to the National Assembly Budget Office's committee-by-committee analysis of fiscal year 2025 settlement accounts, released Monday, the Fair Trade Commission decided to collect 792.63 billion won ($526 million) in fines last year but actually received only 363.65 billion won. The collection rate stood at 45.9 percent, leaving 428.99 billion won uncollected.

The Korea Fair Trade Commission at Government Complex Sejong in Sejong [Newsis]
The Korea Fair Trade Commission at Government Complex Sejong in Sejong [Newsis]

Although the rate improved by 22.8 percentage points from the previous year's 23.1 percent, the commission still failed to collect more than half of the fines it had decided to levy. The collection rate held in the 50-percent range in 2021 and 2022, climbed to 65.9 percent in 2023, then fell sharply to 23.1 percent in 2024 and remained at 45.9 percent last year — marking two straight years below 50 percent.

The commission attributed the low rate to three categories of uncollected amounts: payments whose due dates have not yet arrived due to installment-payment decisions, amounts suspended from collection because of court-ordered stays during trial proceedings, and voluntary delinquencies where fines remain unpaid without justification.

"The 45.9 percent figure is based on settlement accounting," a commission official said. "When amounts not yet due and those under collection suspension are excluded, the effective collection rate — calculated against amounts actually payable in the given year — comes to about 82 percent. The roughly 17 percent unpaid under that measure consists mostly of voluntary delinquencies."

However, voluntary delinquencies — fines left unpaid without justification — are growing rapidly regardless of the adjusted rate. Such unpaid amounts reached 79.84 billion won last year, up 82.8 percent from 43.67 billion won in 2021. The number of businesses in voluntary delinquency also rose over the same period, from 114 to 127.

Meanwhile, the commission's enforcement capacity has stagnated. The number of staff dedicated to fine collection and delinquency management has remained at just two for five consecutive years since 2021.

The total amount of fines imposed this year is widely expected to set an all-time record. Fines the commission has already announced in the first half of this year alone have exceeded 1.7 trillion won, and several major cases — including a probe into bid-rigging in government bond auctions — are nearing resolution. Experts say the commission must overhaul its collection management system to match the growing scale of fines, while also building a penalty framework at the imposition stage that accounts for companies' ability to pay so that levied fines can actually be collected.

Lee Hwang, a professor at Korea University School of Law, said a company's ability to pay becomes an increasingly decisive factor in collection effectiveness as fine amounts grow. "Violations must be judged strictly, but at the imposition stage it is also necessary to consider a company's financial condition and capacity to pay, so that the fine system can actually result in collection," he said.

Meanwhile, the National Assembly Budget Office said complementary measures to maintain cartel-detection capacity are needed alongside any reform of the leniency — or voluntary disclosure — program.

The Fair Trade Commission is pursuing a plan to expand restrictions on leniency eligibility. Under the proposed changes, companies that re-engage in collusion between five and ten years after previously receiving a leniency reduction or being sanctioned for collusion would also lose eligibility, and the fine-reduction benefit itself would be cut in half. The current system restricts leniency only for repeat offenders who collude again within five years.

On this, the budget office said the reform could be expected to deter repeat collusion but might weaken the incentive for voluntary disclosure among businesses sanctioned or granted leniency more than five years ago. Because companies already re-engaged in collusion may focus on evading detection rather than coming forward, the office recommended that the reform be accompanied by measures to foster a culture of internal reporting and strengthen investigative capacity.


y2k@heraldcorp.com