By Kim Yoo-chul
Mark Twain once famously said that, ``to a man with a hammer, everything looks like a nail,’’ and there is no better way to describe the behavior of the Korea Fair Trade Commission (FTC) in the past year.
Newly assigned as the Lee Myung-bak government’s key anti-inflation tool, the fair trade watchdog has been swinging away at corporate Korea, throwing around anti-competitive charges and bullying companies from raising the prices of their products and services.
But following their loud investigation and comments with subdued action, the FTC is quickly developing an ``all bark and no bite’’ reputation.
One of the problems has been the agency’s loose criteria for granting leniency to law-breaking firms, which critics say comes at the cost of credibility and respect.
It’s easy to understand the underwhelming expectations as the FTC declares it will get behind the allegations of anti-competitive behavior by banks and credit card companies, which have been accused of profiteering in a dismal period for industries and families.
In opening an investigation on 37 banks and credit card firms, FTC authorities claim they have reason to believe that these financial firms colluded to keep credit card transaction fees, automated teller machine (ATM) fees and other customer charges elevated above a certain level.
The fines imposed on these companies could prove ``record amounts,’’ FTC sources said.
But even should the FTC manage to back its suspicions with evidence, skeptics are already betting that the biggest offenders will wiggle free.
Under the leniency scheme provided by the FTC, law-breaking companies that come forth first to cooperate with anti-trust authorities have their penalties dramatically reduced or wiped out entirely.
Although the FTC claims that the system has allowed it to get to the bottom of price-fixing activities among fuel companies, electronics makers and dairy manufacturers recently, critics see a loophole that allows the biggest corporate offenders to simply whistle-blow their way out of trouble.
``Leniency is a useful tool for firms,’’ admitted an executive from a financial company included in the investigation.
``No company wants to be hit with a massive fine from the FTC. Coming forward and receiving a discount clearly helps both sides here.’’
FTC officials say they have been monitoring the supposed anti-competitive behavior of banks and credit card companies for the past seven months.
The country’s nine major commercial banks have been charging the same 600 won for every ATM withdrawal after business hours, while credit card firms have been charging gas stations and hospitals identical transaction fees of 1.5 percent.
The FTC has picked now as the time to question why, as public anger over the rising costs of living grows in a pre-election year.
The financial companies have been resisting pressure from politicians to lower their fees and ease the burden on consumers’ credit-crunched wallets.
``We are in deep progress of an investigation on banks and credit card firms for anti-competitive behavior and potential commission manipulation,’’ said an FTC official.
``The targeted banks and credit card firms have been charging exactly the same commission to consumers for various types of transactions. This is strange when considering the different number of ATMs installed by banks as well as the differences in labor costs and management struggles. We believe we have enough evidence to punish them.’’
From 2006 to 2011, the banks in question reaped 33.8 trillion won from commission alone, while credit card companies received 32.7 trillion won from transaction fees.
The FTC could hit the companies with fines that reach 10 percent of their revenue earned through the alleged price fixing.
``It’s hard to comment on the precise size of fines, as we would need details to measure the level of revenue the companies made through price fixing,’’ said the FTC official.
However, a banking industry source thinks the total fines could reach 1.1 trillion won, which would be the largest ever dished out by the fair trade watchdog.
A month earlier, the FTC fined 12 life insurers over $300 million for colluding to fix interest rates on insurance products.
The fines conclude an investigation into illegal conduct that was alleged to have begun in 2001 and continued through 2006.
``It’s possible that a certain bank or credit card issuer will take advantage of a whistle-blowing clause,’’ said the banking industry source.