South Korea’s large family-owned conglomerates have taken steps to dodge revised intra-group transaction bans that go into effect next month for fairer trade, a local business research firm said Monday.

According to Chaebol.com, a corporate information provider on large businesses, 20 key affiliates belonging to business groups that will be affected by the revised fair trade regulations have taken measures in the past few months to effectively avoid restrictions.

Under the changes that go into effect on Feb. 14, 43 large conglomerates, known as “chaebol,” with assets in excess of 5 trillion won ($4.7 billion) will be barred from conducting business deals with certain companies and affiliates that are closely linked to the owners of the business groups.

Such intra-group practices, which virtually ensure safe and lucrative business by giving the companies exclusive contracts related to the conglomerate, have been cited as a form of unfair trade that distorts free market principles of open competition.

Such practices can also be used as a means to pass on the wealth of the current generation of entrepreneurs to their offspring.

The Fair Trade Commission last year picked 122 companies that will come under the new restrictions, after a law revision was passed by the National Assembly.

For non-listed companies, the new rules restrict transactions if stakes held by chaebol owner family members top 20 percent. For listed companies, the ceiling is 30 percent.

According to Chaebol.com, however, a handful of companies have taken steps to reduce the percentage of holdings by family members through mergers with other companies within the group or through reorganization of business areas.

Such moves include the merging of Samsung SNS with Samsung SDS. Samsung Group’s heir-apparent Lee Jay-yong owned a 45.69 percent stake in Samsung SNS, a network service and solution provider, and the company was cited as benefiting the most from intra-group favoritism.

Of its total sales, over 55 percent or 283.4 billion won worth of business came from other Samsung companies.

In addition, Samsung Everland Inc., 46.04 percent owned by family members of Samsung chairman Lee Kun-hee, took over the fashion business sector of Cheil Industries Inc. which has almost no business with other group affiliates.

Such reorganization also took place at Hyundai Motor Group, where Hyundai Engineering Co. plans to merge with Hyundai Amco Co.

The move can reduce the volume of Hyundai Amco shares held by Hyundai Motor’s global chairman Chung Mong-koo and heir apparent Chung Eui-sun. At present, these two men control a 35.06 percent stake in the non-listed company.

Hyundai Amco earned 61.19 percent of its sales from transactions with other Hyundai affiliates.

“In both the Samsung and Hyundai cases, the mergers and reorganization reduce the stakes held by family members of the owners, so these companies will not be affected by the updated fair trade rules,” Chaebol.com said.

It said such practices have been repeated by companies linked to conglomerates such as GS Daesung and Dongbu, and Dongkuk Steel. (Yonhap News)