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Top conglomerates continue to add subsidiaries: FTC

March 7, 2012 - 21:21 By Korea Herald
The business expansion of Korean conglomerates shows no sign of abating, with the number of their affiliated companies increasing for 10 consecutive months, according to the antitrust authorities Wednesday.

According to the Fair Trade Commission, the nation’s 55 biggest companies saw the number of their affiliates grow to 1,667 this month from 1,554 in April last year since their cross-shareholdings started to face limitations.

In February alone, an additional 29 companies were newly established by major firms like Hyundai Department Store, which acquired six new affiliates with its recent acquisition of leading apparel company Handsome.

Four others were excluded as part of merger or sell-out plans, the FTC said.

Amid growing criticism over the expansion of conglomerates, the antitrust watchdog said that the issue was not just the number, but whether they posed any threat to already struggling smaller businesses.

“Over the past two years since the abolition of a ceiling on equity investment by family-controlled conglomerates, there have been modest fluctuations in their affiliated companies,” said a FTC official.

“The issue here is not in the numbers, but their entry into smaller businesses and pursuit of private profits.”

In a separate report released in February, the FTC said that the nation’s top 35 conglomerates acquired a combined 393 affiliates in four years with an annual average of 2.8.

Of them, 74 affiliates were found to have entered business areas such as food retail, education and wedding services that have long been reserved for small- and medium-sized firms.

Samsung and Shinsegae were most active in making inroads into smaller business areas with seven new affiliates, followed by Lotte, GS, CJ and Hyosung.

Among those led by chaebol heirs, Lotte had the largest amount with five affiliates in markets for smaller vendors, while Samsung and Hyundai Motor had four and three, respectively.

Some of them were found to be operating bakery and coffee house chains as of late 2011, even though most of them have withdrawn from the businesses amid growing criticism in recent months.

“Many corporate family members are doing business easily with the help from affiliates. We need to promote healthy entrepreneurship,” the official said.

The FTC plans to toughen surveillance on related issues such as unfair transactions among affiliates, profit-seeking by owner families and voluntary monitoring at individual companies. 

By Lee Ji-yoon (jylee@heraldcorp.com)