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What is Fair Trade
Voluntary Compliance

Overview

Fair Trade Voluntary Compliance involves a company’s adherence to laws and regulations that ensure fair competition.
It is realized through a comprehensive compliance system to voluntarily comply with fair trade-related laws.

The Need for a Voluntary Compliance Program

a significant shift in management philosophy toward fair competition is required in these times.

Fair competition is essential in corporate management and is becoming a global standard.

it is crucial to prevent corporate losses due to violations of the law.

Companies that violate the law face economic penalties, damages, litigation costs, and damage to their social image.
Executives and employees involved in these violations may also face civil and criminal charges. Therefore, the core of our Compliance Program (CP) is to establish a system to prevents such violations.

improving corporate value is another key focus.

By introducing and implementing our CP, we practice transparent management, which in turn improves our corporate value.

Core elements of CP:

01. Establishment and Implementation of CP Standards and Procedures

  • We establish and implement clear standards and procedures for compliance with fair trade laws, ensuring employee awareness and application.

02. CEO’s Commitment and Support for Voluntary Compliance

  • The CEO publicly advocates for voluntary compliance with fair trade laws and actively supports the CP operations.

03. Appointment of a Voluntary Compliance Officer

  • A compliance officer is appointed by the highest decision-making body, such as the board of directors, with the responsibilities to oversee effective CP operations.

04. Production and Use of a Voluntary Compliance Handbook

  • A voluntary compliance handbook is prepared under the responsibility of the voluntary compliance officer and ourlines fair trade laws and CP standards and procedures. This handbook is produced in the form of a document or electronic file so that all executives and employees can easily access and utilize it.

05. Continuous and Systematic Voluntary Compliance Training

  • Compliance training is regularly provided to all levels of staff from the top management and executives, to employees in areas at high risk of fair trade violations.

06. Establishment of an Internal Audit System

  • A well-planned monitoring and audit system is established and operated to detect and prevent illegal activities and periodically report findings to the highest decision-making body such as the board of directors.

07. Sanctions against Executives and Employees who Violate Fair Trade Laws

  • We establish and maintain company regulations that stipulate appropriate sanctions corresponding to the severity of the violation for executives and employees who breach fair trade laws. In instances where an employee's violation is identified, we actively address the situation and implement measures to prevent future occurrences of similar violations.

08. Evaluation of Effectiveness and Improvement Measures

  • To ensure the ongoing effectiveness of our CP, we conduct comprehensive and long-term inspections and evaluations of the CP’s standards, procedures, and operations. Based on these evaluations, we then take appropriate measures for improvement.

Overview of Fair Trade Act

01. Role of the Fair Trade Act

  • The Fair Trade Act is instrumental in ensuring the free economic activities of companies and maintains and promotes fair and free competition to create an effective environment and implement monopoly regulation policies.
  • In Korea, the purpose of the monopoly regulation policies are specified in Article 1 of the Fair Trade Act, and monopoly regulation policies, along with financial and fiscal policy, are one of the three major economic policies of modern capitalist countries.

02. Overview of the Fair Trade Act

  • Officially titled the Monopoly Regulation and Fair Trade Act, this Act addresses the abuse of a dominant market positions and excessive concentration of economic power and regulates unfair collusion and trade practices. Its purpose is to encourage innovative business activities, protect consumers, and promote balanced national economic development by promoting fair and free competition.
  • Special laws under the Fair Trade Act include the Act on Fairness of Subcontracting Transactions (enacted on December 31, 1984), which sets the standards to be observed by the contractor to ensure fair subcontracting transactions; and the Act on Fair Labeling and Advertising (enacted on February 5, 1999; effective from July 1, 1999), which aims to prevent unfair labeling and advertising and establish orders in fair trades.

03. Structure of the Fair Trade Act

  • The Act focuses on two key aspect of competition: maintaining a competitive market structure and removing artificial market restrictions. These regulations serve dual purposes: they preserve competitive market conditions and foster a balanced, mutually beneficial relationship between different market players.
  • In other words, The Fair Trade Act encompasses two types of regulations: structural and behavioral. Structural regulations aim to address and rectify market structure flaws and the excessive concentration of economic power. Structural regulation aims to improve the actual economic welfare of consumers through restoration of healthy market competition. On the other hand, behavioral regulations target competitively restrictive practices and behaviors of individual companies or business groups. These regulations carry a significant social and political policy objective: to protect economically vulnerable small and medium-sized businesses from the tyranny of large corporations.

04. Education Program

  • We provide at least two (2) hours of training every six months for executives and employees, especially in high-risk areas for violating the laws and regulations, such as the sales department. This includes online training modules.
Improvement of Market Structure
  • Relaxation of economic regulations and improvement of competition restriction system
  • Improvement of monopolistic market structure
  • Restrictions on activities of holding companies
    • Setting of establishment requirements to prevent expansion of affiliates
  • Prohibition of anti-competitive business combinations
  • Suppression of economic power concentration
    • Prohibition on mutual investment
    • Restrictions on total investment amount
    • Prohibition of debt guarantees and cancellation of existing guarantees
    • Restrictions on voting rights of financial and insurance companies
    • Board resolution and disclosure of large-scale internal transactions
Improvement of Transaction Form
  • Prohibition of abuse of market dominant position
    • Price abuse
    • Delivery control
    • Interference with other business operators
    • Hindering the entry of new businesses
  • Prohibition of unfair collaborative actions
    • Regulations on price determination
    • Regulations on transaction terms and payment terms
    • Restrictions on production, shipment, and transaction
  • Prohibited unfair actions by business organizations
    • General unfair trade practices
    • Special unfair trade practices
  • Prohibited acts by business organizations
  • Unfair restrictions on conclusion of international contracts

Practical guidelines for Fair trade Compliance

01. Avoid discussing or seeking information about competitors’ pricing.

02. Do not discuss the following with competitors under any circumstances:

  • The scope and area of the market
  • Sales and bidding processes
  • Conditions and customer information
  • Supplier and purchaser information
  • Sales strategies and policies

03. Leave immediately if price-related topics arise during a business group meeting.

04. Do not pressure or influence resellers to discount or increase prices

05. Do not interrupt or threaten supply for the following purposes:

06. Promote or sell our products based on their own merits Instead of tying sales

07. Refrain from making unilateral decisions regarding fair trade

08. Report any suspected violations of fair trade immediately. If you observe any behavior that may violate fair trade principles, regardless of your position within or outside the company, immediately notify the CP monitoring agent, CP dedicated team, or CP compliance officer.

09. Actively participate in the implementation of the company’s fair trade voluntary compliance program.