DISCRETIONARY POWER - FOCUSING ON ADMINISTRATIVE GUIDANCE

1. History

�Administrative Guidance’ (haengjeongjido) is defined as �government’s de facto exercise of power to induce private people into acting in a certain way to realize certain purposes of public administration’.

According to recent research, administrative guidance was widely used for various purposes during President Park Chung Hee’s regime (1962-1979) - more than 50 per cent of which were economic purposes. At that time, govern­ment provided incentives such as grants and tax breaks to companies which accomplished designated export goals. The government took active industrial policy based on unbalanced growth theory. The government’s inducement and regulation of companies was conducted primarily by administrative guidance. In this process, the Economic Planning Board took a critical role (Han, 2006, p. 232).

Administrative guidance was hardly under administrative litigation because of its de facto nature. This is why we cannot easily find administrative guid­ance related cases during President Park Chung Hee’s regime. Consequently, we can see that administrative discretionary power was widely used through administrative guidance and the judiciary was reluctant to control this type of discretionary power.^[465]

2. Current Situation

However, this broad use of administrative guidance was criticized for its authoritarian nature, and many scholars advocated the need for judicial control. In this context, the Constitutional Court intervened in an administra­tive guidance related case, the so call �Kukje Group Dissolution Case’.^[466]

In 1985, under President Chun Doo-Hwan’s regime, the primary lender of Kukje Group, Korea First Bank, announced its plan to dissolve the Group.

In this case, the Constitutional Court ruled that the:

Minister of Finance’s instructions to Korea First Bank (preparing dissolution and releasing press report) are not directives from upper to under administrative agen­cies, and these instructions trespassed the limit of administrative guidance which is conducted in expectation of private company’s voluntary cooperation. Such public power’s interventions virtually result in the dissolution of Kukje Group by enforc­ing compliance from the primary lender. These cannot be deemed dispositions, because these deeds were formally conducted by a private legal person, the primary lender of Kukje Group. However, as these deeds were substantially conducted by public agency resulting in dissolution of Chaebol, these can be an �exercise of public power’ which is required for Constitutional Complaint (Heonbeopsowon).

As witnessed, administrative guidance has been evaluated to have only de facto effect, hence it could not be an object of administrative or constitutional litigation. But in this case, the Constitutional Court controlled the �ostensible’ administrative guidance by �trespassing the limit of administrative guidance’ theory.

These case decisions indirectly inspired the enactment of the Administrative Procedure Act (APA) in 1996.

Overall, administrative guidance contributed to the efficient public admin­istration and economic development at an early stage. But as the market econ­omy was established, consensus was formed that administrative guidance can be detrimental to the establishment of the market economy. In this context, the Constitutional Court tried to control excessive administrative guidance, and related statutes were enacted.

3. Prospects

Although the use of administrative guidance is somewhat reduced, it is contin­uously used as an industrial policy. Recently, the Minister for Information and Telecommunications published administrative guidance relating to telecom­munication rates, leading to a collective rate policy for enterprise. Should that be regulated as an unfair collaborative act under the Monopoly Regulation and Fair Trade Act, or is it exempted from this statute’s application?^[467]

Scholars usually deal with this issue in the context of power distribution between �sector-specific regulatory institution’ and �general competition regu­latory institution’. In the same line, this issue is related to the relationship between industrial policy and competition policy. In Korea, more emphasis was put on industrial policy until the 1970s, but the importance of competition policy increased from the 1980s, with the enactment of the Monopoly Regulation and Fair Trade Act in 1980. This shows economic development based on governmental initiative being replaced by market economy based on private sector initiative. But use of administrative guidance in some industries (e.g. IT industry) shows the need for industrial policy even after achieving basic economic development.

Although the Supreme Court accepts that lawfully published administrative guidance can avail the exceptions to the Monopoly Regulation and Fair Trade Act, in individual cases, the Supreme Court usually denies such exceptions, hence narrowing the scope of exemptions of this Act.^[468] In principle, as a market economy is established, active use of administrative guidance should be diminished. However, lawfully conducted administrative guidance for the purpose of industrial policy should be acknowledged.

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