This article was published on April 23, 2025, at 11:26 a.m. on the ChosunBiz RM Report site.
The Fair Trade Commission is overhauling the self-compliance program (CP) evaluation system. Initially, it withdrew a proposal to raise the score criteria after resistance from the industry that it would 'confuse corporations.' The adjustment is seen as a compromise aimed at maintaining the core of the reform while reducing confusion on the ground.
On the 23rd, the Fair Trade Commission finalized the amendment to the 'Regulations on the Operation and Evaluation of the Self-compliance Program (CP)' and announced that it would take effect from that day. This amendment has significantly revised the main contents of the draft that was announced for administrative notice in March.
The CP is a self-compliance program in which corporations establish and operate an internal education and supervision system to ensure compliance with fair trade regulations. The Fair Trade Commission reduces the penalty surcharge by up to 20% for corporations that receive a grade of AA or higher in the CP evaluation in case of legal violations.
◇ The Fair Trade Commission, which said it would raise the score, eventually retracted... Maintaining the existing grade standards
Initially, the Fair Trade Commission proposed to raise the CP excellence grade score from 70 points based on the A grade to 80 points, and to adjust the AA standard from 80 points to 85 points. However, this proposal faced backlash from the industry. The Federation of Korean Industries criticized that 'corporations typically establish and operate their annual plans based on score criteria by grade at the beginning of the year, and apply for grade evaluation the following year.' It added that 'the Fair Trade Commission caused confusion by announcing the adjustment of score standards only ten days before the evaluation applications opened in February.'
Ultimately, the Fair Trade Commission decided to maintain the grade standard scores as they are. The existing score system, where AAA is 90 points or higher, AA is 80 points or higher but less than 90 points, and A is 70 points or higher but less than 80 points, will be retained, but the evaluation grades will be simplified from the existing six grades (AAA to D) to a three-grade system (AAA, AA, A).
As a result of this amendment, the existing B, C, and D grades have been abolished. The Fair Trade Commission aims to enhance both the reliability and effectiveness of the system by designating these three grades as the 'CP Excellent Corporation Designation System.'
Although the incentive of exemption from spontaneous investigation granted to A grade was abolished in this amendment, it has been decided to temporarily maintain it until 2026, considering the grace period for the change in the system.
◇ Switch from automatic downgrade to point deduction... Burden reduced for corporations violating CP
One of the parts that corporations welcomed the most in this amendment is the abolition of the 'automatic downgrade' system. Previously, if a corporation operating under CP faced penalty surcharges or accusations, their grade would be automatically downgraded by 1 to 2 levels. The amendment abolished this method and changed it to a point deduction system. A maximum of 5 points will be deducted for legal violations, and downgrades or designations for exclusion will only be possible if the evaluation review committee deems it necessary.
This is a measure that partially accepts the industry's rebuttal that 'there is no incentive to participate in the system if the grade becomes invalidated due to subsequent sanctions after simply applying for the grade.' A Fair Trade Commission official explained that 'no point deductions will apply to corporations that are applying for the CP grade evaluation for the first time.'
The 'grade suspension system,' which held the evaluation after the Fair Trade Commission's investigation began following a corporation's evaluation application, has also been abolished. Previously, the evaluation could be halted simply by the initiation of an investigation or the submission of an audit report. In the future, even if an audit report is submitted, the evaluation itself will proceed as scheduled. This is a measure to resolve the unreasonable delay of evaluations for corporations that have been concluded as not guilty.
The amendment also includes provisions to award up to 1.5 points in the CP evaluation for corporations that received 'excellent' or higher in the compliance evaluation (subcontracting, franchising, distribution, and agency). This can be combined with the existing 'support for other companies' CP operation' grace points (up to 7 points) to receive a maximum of 8.5 points. Some industry stakeholders raised concerns about fairness, stating that 'non-target industries may be at a disadvantage.'
Some have pointed out that this amendment has merely patched the system without a complete overhaul of the evaluation indicators. Lee Jun-gil, an advisor at the law firm Jiphyeon, stated that 'a comprehensive review of the grade evaluation indicators and standards is necessary, as the evaluation system itself has not changed since 2006.' He added that 'there is also the issue that no evaluations are conducted for corporations graded B or lower, so there are no feedback opportunities regarding the level of CP operation.'
Meanwhile, there are observations in the industry that the CP system may be strengthened further due to changes in the political environment. An official from a large law firm noted that 'the CP was introduced during the administrations of Kim Dae-jung and Roh Moo-hyun, and there is a precedent where the presidential office included CP in the management evaluation of public institutions during Moon Jae-in's presidency.' They added that 'if the Democratic Party comes to power, efforts to strengthen CP might intensify again.'