Identifier
Created
Classification
Origin
06SEOUL1868
2006-06-07 05:45:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Seoul
Cable title:  

COMPETITION POLICY: AMBASSADOR'S MEETING WITH

Tags:  ETRD EINV PGOV KS 
pdf how-to read a cable
VZCZCXYZ0004
PP RUEHWEB

DE RUEHUL #1868/01 1580545
ZNR UUUUU ZZH
P 070545Z JUN 06
FM AMEMBASSY SEOUL
TO RUEHC/SECSTATE WASHDC PRIORITY 8273
RUEAWJA/DEPT OF JUSTICE WASHINGTON DC PRIORITY
INFO RUEHBJ/AMEMBASSY BEIJING 0748
RUEHKO/AMEMBASSY TOKYO 0820
RUCPDOC/DEPT OF COMMERCE WASHDC 1478
RUEATRS/DEPT OF TREASURY WASHINGTON DC
UNCLAS SEOUL 001868 

SIPDIS

SENSITIVE
SIPDIS

PASS USTR FOR CUTLER, AUGEROT AND KI
JUSTICE FOR STU CHEMTOB AND RENATA HESSE
STATE FOR EB/TPP/IPE, EB/OIA, EB/TPP/BTA AND EAP/K
COMMERCE FOR 4431/MAC/OPB/EAP/DUTTON
TREASURY FOR IA/ISA/BUCKLEY AND ITT/CHANG

E.O. 12958: N/A
TAGS: ETRD EINV PGOV KS
SUBJECT: COMPETITION POLICY: AMBASSADOR'S MEETING WITH
KOREA FAIR TRADE COMMISSION CHAIRMAN KWON OH-SEONG

SUMMARY
-------

UNCLAS SEOUL 001868

SIPDIS

SENSITIVE
SIPDIS

PASS USTR FOR CUTLER, AUGEROT AND KI
JUSTICE FOR STU CHEMTOB AND RENATA HESSE
STATE FOR EB/TPP/IPE, EB/OIA, EB/TPP/BTA AND EAP/K
COMMERCE FOR 4431/MAC/OPB/EAP/DUTTON
TREASURY FOR IA/ISA/BUCKLEY AND ITT/CHANG

E.O. 12958: N/A
TAGS: ETRD EINV PGOV KS
SUBJECT: COMPETITION POLICY: AMBASSADOR'S MEETING WITH
KOREA FAIR TRADE COMMISSION CHAIRMAN KWON OH-SEONG

SUMMARY
--------------


1. (SBU) Newly-appointed Korea Fair Trade Commission (KFTC)
Chairman Kwon Oh-seong told the Ambassador on May 25 that he
is planning to redirect KFTC policy toward a stricter
approach toward anti-competitive commercial practices, while
taking a lighter touch toward limiting the overall economic
power of Korea's family-run "chaebol" conglomerates. The
Ambassador cautioned Chairman Kwon that over-zealous
regulatory pursuit of foreign firms could dampen the
enthusiasm of foreign investors to put more capital into
Korea. End Summary.

FTA COMPETITION POLICY CHAPTER AND "COMITY"
--------------


2. (SBU) Chairman Kwon was appointed Chairman of the KFTC in
March, capping an illustrious career as one of Korea's
leading academic experts on competition policy issues. He
welcomed the Ambassador, noting that Korea has a lot to learn
from the United States' 125-year history of anti-monopoly
policies. Kwon said he enjoyed hosting U.S. Fair Trade
Commission Chairman Majoras in early April, and learned a lot
from her lecture. Kwon said that he expects that the
competition policy chapter of the U.S.-Korea Free Trade
Agreement will be negotiated without much difficulty.


3. (SBU) The Ambassador noted that fair anti-trust
adjudication is an important element of an attractive
investment environment. Observing that Microsoft is
appealing the KFTC's decision against it to the Korean
courts, the Ambassador encouraged Kwon to consider the
benefits of respect for "comity" and the usefulness in
situations like that of Microsoft to respect international
precedent, especially when that precedent is set in a
multinational corporation's home market and the plaintiff
itself is a foreign company. Access to the latest
information technology innovations is an important "public
good," the Ambassador explained, and said he hoped that
Korean consumers will not be disadvantaged by the KFTC
decision. He also expressed concern about a potential

chilling effect on investment in Korea's high-technology
sector, particularly software development.


4. (SBU) Chairman Kwon responded that both sides claim to be
defending the best interests of consumers. He explained that
Korean anti-trust law differs from that of the United States
in that it mandates the KFTC to explicitly prevent the "abuse
of a market dominant position." This is why Korea used the
European Union approach in the Microsoft case. Kwon admitted
that it was a difficult decision, but added "we did our
best." Concerning KFTC's ongoing investigation of Intel
Corporation, Kwon confirmed that the KFTC was acting based on
a tip-off by AMD. The investigation is still in its early
stages, but thus far Kwon said there appears to be some
evidence of wrongdoing and damage to Korean companies.

NEW FOCUS ON ANTI-COMPETITIVE PRACTICES
--------------


5. (SBU) Kwon volunteered to explain his own approach to
competition policy issues, and how that would differ from his
predecessor Kang Chul-kyu. Whereas former Chairman Kang took
a broad view of his responsibility to rein in the economic
power of the "chaebol," based on "market distortions"
resulting from an excessive concentration of capital,
Chairman Kwon said that he would focus more narrowly on
actual anti-competitive practices. Kwon said he hoped to
de-politicize the Korean government's approach toward the
chaebol. For example, even as he tries to prevent chaebol
affiliates from unfairly leveraging the market power of their
parent companies, he would not seek to break up the chaebol
nor try to explicitly fight family ownership.


6. (SBU) The Ambassador praised the Roh Administration's
anti-corruption efforts, which are particularly welcomed by
foreign investors. Kwon then inquired about the U.S.
Government view of the Lone Star investigations. The
Ambassador responded that Korean investigatory authorities
seem to be "piling on" to Lone Star to win political points.

This has created uncertainty among potential foreign
investors as to whether Korea still wants foreign investment.
Kwon defended the investigations, stating that many in Korea
believe that after the financial crisis "some foreign
companies are taking more from Korea than they contributed."
EconMinCouns explained Lone Star's perspective: the company
saved a dying bank and added to its value, and simply wants
recognition of the value of its investment.

COMMENT
--------------


7. (SBU) Kwon's statements about his chaebol policy are
consistent with statements coming from Financial Supervisory
Commission Chairman Yoon Jeung-hyun calling for easing of Roh
Administration efforts to limit intra-chaebol
cross-investments. It would appear that three years of
complaints from Korean big business have started to wear down
Roh Administration resolve to seek greater "justice" in the
socio-economic realm. End Comment.
VERSHBOW