SEOUL – The South Korean government and the ruling party announced on Tuesday a sweeping reform of economic punishment regulations, shifting the focus from criminal imprisonment to heavy financial penalties. Under the new "Second Economic Punishment Rationalization Plan," major retailers like Coupang and large supermarket chains could face fines of up to 5 billion won ($3.8 million) for unfair trade practices—a tenfold increase from the previous 500 million won cap.
Prioritizing Economic Impact over Criminal Records
The decision, finalized during a consultative meeting between the government and the Democratic Party on December 30, aims to modernize 331 legal provisions. The core philosophy behind the move is to enhance the effectiveness of law enforcement by imposing substantial financial blows rather than stifling corporate management with excessive criminal labels.
"We are replacing outdated criminal penalties with stronger administrative sanctions to ensure that companies take financial responsibility while maintaining business continuity," said Kweon Chil-seung, head of the task force on economic punishment.
Key Legislative Changes
The reform covers several industries where "Apgil" (unfair use of power by dominant players) has been a persistent issue:
Retail Sector: Large-scale distributors that prevent suppliers from trading with competitors will no longer face up to two years of imprisonment. Instead, the maximum administrative fine has been hiked from 500 million won to 5 billion won. Criminal charges will now only apply if a company defies a direct corrective order from the government.
Tech and Telecommunications: Telecom operators that fail to implement measures to prevent location data leaks will see their potential fines jump from 400 million won to 2 billion won, with the previous one-year prison sentence scrapped.
Construction and Franchising: Cases where contractors withhold advance payments from subcontractors, or where franchise headquarters rush contract signings without sufficient disclosure, will now trigger fines of up to 5 billion won instead of criminal prosecution.
Differentiating Administrative Errors
The plan also seeks to decriminalize minor administrative oversights. For example, automobile manufacturers who fail to submit greenhouse gas emission documents will be subject to an administrative fine (Gwaetaeryo) rather than a criminal fine (Beolgeum). Similarly, minor violations regarding camping car tuning inspections or apartment management record-keeping will be downgraded from criminal offenses to administrative penalties.
This second round of reforms follows a primary phase in September, which revised 110 clauses. Business lobbies have generally welcomed the shift, noting that the threat of criminal records for CEOs has often discouraged investment, while the public expects that the significantly higher fines will serve as a more effective deterrent against corporate malpractice.
[Copyright (c) Global Economic Times. All Rights Reserved.]
