What Should Foreign Companies Know About Korean Competition Law?

Short Answer

Foreign companies doing business in Korea should understand that Korean competition law may apply even if the company is incorporated overseas.

Under the Korean Monopoly Regulation and Fair Trade Act (MRFTA), conduct outside Korea may still be regulated if it affects the Korean market.

For foreign companies, competition law issues commonly arise in ordinary commercial activities, including distribution, pricing, exclusive dealing, information sharing, and M&A transactions.

The main risk is that a business practice that seems commercially normal from a global perspective may still raise issues under Korean fair trade rules.

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Does Korean Competition Law Apply to Foreign Companies?

Yes.

Korean competition law can apply to foreign companies if their conduct affects the Korean market.

This may be relevant even where:

• The company is incorporated outside Korea.
• The contract is signed outside Korea.
• Key decisions are made by an overseas headquarters.
• The Korean business is operated through a distributor, agent, subsidiary, or branch.
• The conduct involves cross-border sales into Korea.

The key issue is not only where the company is located, but whether the conduct has a meaningful connection to the Korean market.

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What Types of Conduct May Raise Competition Law Issues?

Competition law issues may arise from a wide range of business conduct.

Common examples include:

• Price-fixing or coordination with competitors
• Bid-rigging
• Market allocation
• Minimum resale price policies
• Exclusive dealing
• Refusal to supply
• Discriminatory treatment of trading partners
• Abuse of market dominance
• Improper information sharing
• Restrictive distribution arrangements

Not every restriction is unlawful.

However, companies should review whether a particular practice may restrict competition, create unfair trading conditions, or disadvantage Korean trading partners.

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Do Distribution Agreements Raise Competition Law Issues?

Sometimes.

Distribution agreements are generally lawful and commonly used in Korea.

However, competition law issues may arise if the agreement includes restrictions on how the distributor may sell, price, or handle customers.

Examples may include:

• Minimum resale prices
• Strict territorial restrictions
• Customer allocation
• Exclusive purchase obligations
• Restrictions on online sales
• Unreasonable termination rights
• Discriminatory supply conditions

These clauses should be reviewed carefully before execution.

A clause that is commonly used in another jurisdiction may need to be adjusted for Korea.

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Can We Set Resale Prices for Korean Distributors?

This is a sensitive issue.

Foreign manufacturers and brand owners often want to control pricing in Korea to protect brand value or market positioning.

However, a policy that fixes or pressures distributors to follow certain resale prices may raise issues under Korean competition law.

Companies should be especially careful with:

• Minimum resale price requirements
• Threats to terminate supply for discounting
• Pressure on dealers to follow recommended prices
• Monitoring and enforcement of resale prices
• Informal pricing instructions through emails or messages

Even if the contract does not expressly require a fixed resale price, actual business practice may still matter.

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Can We Restrict Where Distributors Sell Products?

Possibly, but the restriction should be reviewed.

Territorial restrictions or customer restrictions may be used for legitimate commercial reasons, such as managing distribution networks or preventing channel conflict.

However, overly restrictive arrangements may raise competition concerns, especially if they limit competition, reduce market access, or disadvantage certain trading partners.

Companies should review whether the restriction is reasonable, proportionate, and necessary for the business purpose.

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Can We Refuse to Supply a Korean Customer or Distributor?

Sometimes, but not always without risk.

A company may have legitimate business reasons to refuse supply, such as credit risk, quality control concerns, compliance issues, or failure to meet contractual requirements.

However, refusal to supply may raise competition law issues if it is used to exclude competitors, pressure trading partners, enforce problematic pricing policies, or discriminate unfairly.

The legal risk depends on the company’s market position, the reason for refusal, and the effect on the Korean market.

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What About Information Sharing with Competitors?

Information sharing can create serious competition law risk.

Companies should be careful when communicating with competitors, industry associations, dealers, or business partners about sensitive commercial information.

Sensitive information may include:

• Prices
• Discounts
• Future pricing plans
• Production volume
• Sales volume
• Customer allocation
• Bidding strategy
• Market entry plans

Even informal communications can become important evidence in a competition investigation.

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Do M&A Transactions Raise Competition Law Issues?

Yes.

Certain mergers, acquisitions, joint ventures, and share acquisitions may trigger Korean merger control or other competition law review.

Foreign companies should consider Korean competition law when acquiring:

• A Korean company
• Shares in a Korean business
• Control over a business with Korean market impact
• Assets or business operations affecting Korea

Competition law review should be considered early in the transaction timetable, not only after signing.

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Can Foreign Companies Be Investigated by the KFTC?

Yes.

The Korea Fair Trade Commission (KFTC) may investigate suspected violations of Korean competition law.

Depending on the case, a KFTC investigation may involve:

• Requests for documents
• Requests for explanations
• Interviews with company personnel
• On-site inspections
• Review of business records
• Review of electronic data

At the beginning of an on-site investigation, companies should carefully check the investigation notice, the purpose of the investigation, the requested materials, and the scope of the inspection.

Companies should cooperate appropriately, but they should also manage the process carefully.

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What Are the Possible Consequences of Violations?

Competition law violations may have significant consequences.

Depending on the case, consequences may include:

• Corrective orders
• Administrative fines or surcharges
• Criminal referral
• Civil damages claims
• Contractual disputes
• Reputational harm
• Disruption to business relationships

The consequences may affect not only the Korean subsidiary or distributor, but also overseas headquarters if the relevant decision was made outside Korea.

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How Can Companies Reduce Competition Law Risks?

Companies can often reduce risk through early review.

Practical steps include:

• Reviewing distribution agreements before signing
• Reviewing pricing policies before implementation
• Training sales and business teams
• Managing communications with competitors carefully
• Reviewing exclusive dealing arrangements
• Creating internal approval procedures for sensitive commercial decisions
• Conducting competition law review before M&A transactions
• Preparing response procedures for KFTC investigations

Competition law compliance should be integrated into ordinary business operations.

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Practical Considerations

Foreign companies doing business in Korea should regularly review:

• Distribution agreements
• Resale pricing policies
• Dealer communications
• Exclusive supply or purchase arrangements
• Refusal-to-supply decisions
• Communications with competitors
• Industry association activities
• M&A and joint venture plans
• Internal compliance training

Many competition law issues arise not from obvious misconduct, but from routine business practices that were not reviewed under Korean law.

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Conclusion

Korean competition law may apply to foreign companies if their conduct affects the Korean market.

For foreign companies, the most common risks often arise from distribution structures, resale pricing, exclusive dealing, refusal to supply, information sharing, and M&A transactions.

Because Korean competition law issues can lead to KFTC investigations, financial penalties, and business disruption, companies should review sensitive commercial practices before implementation rather than waiting until a dispute or investigation begins.

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