Budget the investigation, not only the possible surcharge
A Korea Fair Trade Commission matter can consume cash well before any final surcharge is known. Counsel may need to support an on-site inspection, preserve and review electronic records, interview employees, prepare written submissions, test economic evidence, attend a hearing, and assess an objection or administrative lawsuit. Each workstream has a different probability and payment date.
This calculator connects three adviser-supplied surcharge scenarios with investigation, examiner-report and hearing, and appeal budgets. It reports nominal expected exposure, discounted present value, a full-stage downside case, and the largest scheduled cash event. It also shows the assumed surcharge reduction needed for a separately priced remediation package to break even.
What the tool does not decide
- Whether conduct violates Korean competition law or another statute
- Related sales, severity, aggravation, mitigation, leniency status, or the final surcharge
- Whether a consent decision, settlement path, objection, lawsuit, stay, extension, or instalment is available
- The probability of an adverse outcome or the scope and price of professional work
- Civil damages, criminal exposure, overseas proceedings, tax treatment, or accounting recognition
How this differs from the cartel surcharge calculator
Statutory amount model
The separate cartel surcharge and damages calculator explains a conduct-specific path using related sales, a base rate, duration, repeat conduct, leniency, and civil damages. Use it only when that legal model fits the matter and the required facts have been reviewed.
Response-budget model
This calculator accepts the resulting exposure scenarios as inputs. It then models counsel, internal review, e-discovery, economic analysis, experts, remediation, stage probabilities, and timing. It does not apply one surcharge formula across every unfair-practice category.
Current Korean procedure checkpoints used for the budget
The legal references below were checked through the Korean National Law Information Center OPEN API on August 13, 2026. They describe process boundaries, not an outcome prediction. The current Monopoly Regulation and Fair Trade Act is Law ID 001591, MST 285951, effective May 12, 2026.
Korean fair-trade investigation stages, legal checkpoints, and budget items| Stage | Current checkpoint | Budget implication |
|---|
| Investigation | MRFTA Article 81 covers attendance, expert appointment, document submission or temporary custody, workplace entry, and review of electronic, audio, and video material. Article 83 preserves the right to counsel in investigation and hearing. | Counsel, internal review hours, collection, hosting, search, and e-discovery work |
| Examiner report and hearing | Article 93 requires an opportunity to state views before a corrective order or surcharge. Article 95 permits access and copying subject to trade-secret, leniency, and non-public exceptions. The current Case Procedure Rules set response and hearing steps. | Written response, fact and data validation, economic analysis, hearing preparation, and internal time |
| Objection and court review | Article 96 provides a 30-day objection window and a 60-day ruling period, extendable by up to 30 days. Article 99 sets a separate 30-day, non-extendable filing period for an administrative lawsuit after the relevant service event. | Conditional appeal counsel, internal work, experts, and a separate filing calendar |
| Payment planning | Article 102 lists surcharge considerations. Article 103 allows extension or instalment only when statutory conditions and procedure are satisfied; the application timing is not a default cash-flow assumption. | Keep the entered payment month conservative unless current case advice supports another schedule |
Published processing periods are not cash-payment promises
Article 13 of the current KFTC Case Procedure Rules gives default processing references of six months for general matters, nine months for dominance and unfair-support matters, and thirteen months for cartel matters. Extensions and excluded periods may apply, and deliberation, decision, service, and review can continue later. Enter payment months from the actual response calendar and engagement terms.
Inputs to collect before calculating
Three surcharge scenarios
- Favourable, base, and adverse gross surcharge exposure
- A probability for each scenario from counsel or a documented decision workshop
- The planned surcharge payment month, without assuming an automatic stay or instalment
Stage costs and probabilities
- External counsel, internal hours, and a fully loaded internal hourly value
- E-discovery for investigation, economics for hearing, and experts for appeal
- Hearing-reach probability and appeal probability conditional on reaching hearing or disposition
Timing and present value
- Month zero as the budget valuation date
- Expected payment month for each cost group
- An approved annual nominal discount rate used consistently across alternatives
Separate remediation case
- Actual remediation, monitoring, customer, or operational-change cost
- A purely assumed surcharge reduction percentage for arithmetic comparison
- The expected month in which the remediation cash is paid
Calculation method
1. Normalize scenario probabilities
Normalized probability = entered probability / sum of all entered probabilities. If the sum is zero, the expected surcharge is unavailable and the interface asks for at least one positive weight.
2. Build full and expected stage costs
Full stage cost = counsel fee + internal hours × internal hourly value + specialist cost. Investigation is treated as committed. Hearing cost is multiplied by the hearing-reach probability. Appeal cost is multiplied by hearing-reach probability × conditional appeal probability.
3. Combine exposure and discount each cash event
Expected total = expected surcharge + expected investigation, hearing, and appeal costs. Present value for a payment in month m = expected payment / (1 + annual discount rate)m / 12. Payments in the same month are grouped when identifying the peak expected cash event.
4. Test remediation arithmetic
Expected surcharge saving = expected surcharge × assumed reduction percentage. Break-even reduction = remediation cost / expected surcharge. A positive saving does not establish legal eligibility, acceptance, causation, or an actual surcharge reduction.
Worked example using the editable defaults
The sample values are not KFTC statistics or market fee benchmarks. They exist only to make the mechanics auditable. The favourable surcharge is KRW 0 at 25%, the base surcharge is KRW 500 million at 50%, and the adverse surcharge is KRW 2 billion at 25%.
Default worked example showing full and probability-weighted defence costs| Item | Full amount | Expected amount |
|---|
| Surcharge exposure | KRW 2,000,000,000 downside | KRW 750,000,000 |
| Investigation | KRW 158,000,000 | KRW 158,000,000 |
| Hearing at 70% | KRW 128,000,000 | KRW 89,600,000 |
| Appeal at 40% conditional | KRW 145,000,000 | KRW 40,600,000 |
| Total | KRW 2,431,000,000 downside | KRW 1,038,200,000 |
Expected defence cost
KRW 288,200,000
Expected total PV at 5%
KRW 996,401,081
Largest default cash event
KRW 750,000,000
Expected surcharge in month 12
Read the remediation result cautiously
With a KRW 120 million remediation cost and an assumed 20% surcharge reduction, the default model shows a KRW 150 million nominal expected surcharge saving. The nominal net saving is KRW 30 million, and the arithmetic break-even reduction is 16%. Discounting remediation in month 3 and the surcharge in month 12 produces a remediation-case present value of KRW 972,089,124 and a present-value saving of KRW 24,311,957.
Cartel warning under Article 89
Formal consent-decision treatment under Articles 89 to 91 is not a generic settlement option. Article 89 excludes conduct under Article 40(1), among other exclusions and referral conditions. Selecting a cartel matter therefore displays a warning. For every case type, the assumed reduction remains a user scenario and never represents KFTC acceptance or a guaranteed outcome.
A practical workflow for finance, legal, and compliance teams
- Define the budget boundary. Decide whether the model covers the entire matter or only future spend from the valuation date.
- Obtain three reviewed exposure numbers. Preserve the legal and factual memo behind each surcharge amount instead of treating the labels as a substitute for analysis.
- Price each stage from scope. Reconcile engagement letters, staffing, data volume, hosting, interviews, economics, experts, VAT, and expenses so omissions and double counting are visible.
- Separate conditional probabilities. Appeal probability is conditional on reaching hearing or disposition; the model multiplies both probabilities to calculate unconditional expected appeal cost.
- Set cash dates from the live calendar. Use actual billing terms, expected service events, and a conservative surcharge date rather than a published processing-period shorthand.
- Report expected and downside views together. Expected exposure supports provisioning discussions; the full-stage downside and peak cash event support liquidity and authority limits. Neither number determines accounting recognition.
Scenario refresh points
After an on-site inspection
Replace the investigation budget with scoped quotes. Keep hearing and appeal ranges broad while the team secures preservation, review capacity, and initial decision authority.
After the examiner report
Remove sunk cost if the question is future cash only, set the appropriate hearing probability, and update written-response, economics, evidence, and hearing-preparation scope.
Around the decision
Narrow the surcharge and timing scenarios. Keep objection, lawsuit, stay, extension, and instalment analysis in a separate legal memo, then copy only supported cash assumptions into the model.
Costs and risks outside the result
- Civil damages, follow-on claims, customer refunds, and contract disputes
- Criminal referral, individual defence, fines, employment action, and director or officer issues
- Business interruption, management distraction, customer loss, procurement restrictions, and reputation loss
- Security, interest, cancellation risk, and conditions for surcharge extension or instalment
- Stay proceedings, redetermination, refunds, tax, accounting, and insurance treatment
- Parallel foreign investigations, local counsel, translated data production, and overseas penalties
Provisions and contingent liabilities require the applicable accounting standard, management evidence, and auditor judgement. Do not copy the probability-weighted result directly into financial statements or public disclosure without that separate analysis.
Frequently asked questions
What happens when the three probabilities do not total 100%?
If their sum is positive, the calculator normalizes them proportionally to 100%. Record both the entered and normalized percentages so reviewers can distinguish deliberate relative weights from a missing scenario. A zero total cannot produce an expected surcharge.
Must the favourable surcharge be zero?
No. Even a favourable outcome can include a surcharge, refund, corrective cost, or another adviser- reviewed amount. Defence costs already incurred remain in the stage budget even when surcharge exposure is zero.
Does a 40% appeal probability mean 40% of all matters?
No. It is conditional on reaching the hearing or disposition stage in this model. With a 70% hearing- reach probability, the unconditional appeal-cost probability is 70% × 40% = 28%.
Does a low remediation break-even percentage support a consent decision?
No. It is only cost divided by expected surcharge. Article 89 exclusions, case eligibility, initiation, acceptance, remedy design, and actual surcharge effects require separate legal and agency review. Article 40(1) cartel conduct is excluded from formal consent-decision treatment.
Should the published KFTC processing period be the payment month?
Not automatically. Extensions, excluded periods, deliberation, decision, service, and review may alter the calendar. Use the live matter timetable, billing terms, and case advice.
How should sunk investigation cost be handled?
Set already paid amounts to zero when the question is future funding only. Retain them when reporting the total economic cost of the matter, but label the result so it is not mistaken for future cash need.
Official references and currency date
- Monopoly Regulation and Fair Trade Act, Law ID 001591, MST 285951, effective May 12, 2026: Articles 81, 83, 89 to 91, 93, 95, 96, 99, 102, and 103
- Enforcement Decree of the Monopoly Regulation and Fair Trade Act, ID 003440, MST 284737, effective March 24, 2026
- KFTC Rules on Meetings and Case Procedures, administrative-rule ID 20242, serial 2100000270720, Notice 2025-15, effective December 31, 2025: Articles 13, 25, 35, 37, 42, 50, 64, 76, and 78
- Detailed Standards for Imposing Surcharges, administrative-rule ID 27230, serial 2100000278442, Notice 2026-3, effective April 30, 2026
Source status checked August 13, 2026. Reconfirm the current text, service date, agency notice, and matter-specific advice before using a deadline or cash assumption. This calculator is a planning aid, not legal, accounting, tax, audit, valuation, or investment advice.
Turn the next response meeting into a dated cash plan
Replace every sample with a sourced scenario, current quote, internal workload estimate, conditional probability, and expected payment month. Save the assumptions beside the result so the model can be refreshed as facts, procedure, and strategy change.