By Kang Seung-woo
Korea’s anti-trust watchdog said Thursday that it had fined STX, Hanwha and Woongjin groups a combined 6 billion won for unfair business practices.
The Fair Trade Commission (FTC) said the three had carried out intra-group deals with unprofitable affiliates, giving them orders and deals as a means to boost the groups’ heads’ stakes in the subsidiaries.
STX, a shipbuilding and shipping conglomerate, was fined 1.12 billion won ($972,160) and Woongjin and Hanwha, 3.42 billion won and 1.47 billion won, respectively.
In 2007, STX signed a deal with inexperienced STX Construction for the construction of an apartment block for its employees and paid the latter 56.3 billion won. The construction company was established in 2005 and STX Chairman Kang Duk-soo owns a 75.03 percent stake in the builder.
In addition, the builder was paid more ― 15 percent per 3.3 cubic meters ― than unaffiliated players that also signed deals with STX at the same time for similar apartment buildings. This contributed to the subsidiary registering an 18.46 percent profit and moved it from 150th in 2007 to 50th in 2009 in construction company rankings.
STX posted the highest intra-group trading ratio of 23.49 percent last year, according to an FTC report, released in October.
Woongjin Holdings, Woongjin’s procurement service unit, was contracted for maintenance, repair and operations for the group’s five affiliates including Woongjin Coway, the industry leader in water and air purifiers, from October 2005 to October 2011. This was aimed at boosting profits at the company, in which family members of Chairman Yoon Seok-keum hold a 78 percent stake.
In addition, last year it gave 60 billion won and 1 million shares in Woongjin to Woongjin Polysilicon, another affiliate, as collateral to help the latter borrow money from Woori Bank at low interest. Woongjin Polysilicon had suffered a net loss for three years in a row.
Hanwha eroded business prospects of small- and mid-sized companies by only selling industrial fuel on commission through Hanwha Polydreamer, which made 2.64 billion won from 2006 to 2010 as a result.
“The fines are expected to halt unfair business practices between conglomerates and their affiliates,” said an FTC official.