South Korea‘s corporate watchdog will take strict action against intra-affiliate transaction practices by large business groups as part of its efforts to root out illegal business deals arranged by conglomerate-controlling families, its chief said Tuesday.
Local business groups, or chaebol in Korean, have been criticized for helping their owning families increase personal profits by funneling orders and contracts to subsidiaries owned by other family members or relatives.
Since the antitrust law was revised to tighten punishments on such practices last year, the Fair Trade Commission has launched an investigation into five major business groups, including Hyundai Group, Hite Jinro Group, CJ Group, Hanjin Group and Hanwha Group.
“We’ve checked the records of some 40 conglomerates and selected those five who are suspected of engaging in massive intra-affiliate transactions. We will take action one by one after wrapping up the investigation,” FTC Chairman Jeong Jae-chan said in an interview with Yonhap News Agency. “We will also inspect other suspected companies in the future.”
The FTC has issued an official report that the Hyundai Group‘s two core affiliates -- Hyundai Securities Co. and Hyundai Logistics Co. -- allegedly helped a relative of chairwoman Hyun Jeong-eun via intra-affiliate transactions.
Jeong said it is just the start of the investigation, noting that other conglomerates are next on the FTC’s list after it finishes with the five suspected groups.
Under the revised law, affiliates of business groups with assets exceeding 5 trillion won ($4.33 billion) are barred from giving work to companies in which an owning family holds more than a 30 percent stake.
Intra-subsidiary deals worth 20 billion won are subjected to FTC punishment.
The FTC can file a criminal lawsuit against the conglomerate-controlling owners when they are found to have been instructed to complete illegal transactions in order to make a handsome profit, the chairman said. (Yonhap)