By Lee Hyo-sik
The Fair Trade Commission (FTC)’s probe into inter-subsidiary dealings has unnerved the country’s family-controlled conglomerates, which have long used unfair practices to boost the wealth of offspring and other relatives of the groups’ chairmen.
Currently, Hanjin Group, Hyundai Group and Lotte Group are under FTC investigation, and several more conglomerates are expected to face the similar fate in the coming months.
Under the law, which took effect in February, companies are banned from establishing a preferred deal with unlisted affiliates in which company owners hold at least a 20 percent stake in benefiting affiliates. The limit is set at 30 percent for listed units. Violators can face up to three years in prison.
However, some business groups continue to maintain intra-group dealings among their affiliates.
The anti-trust agency has launched a probe into Hanjin Group’s unlisted subsidiary, CyberSky, which publishes promotion magazines for Korean Air and operates an online duty-free shopping mall for the carrier, for the alleged unfair business practices.
Hanjin Group Chairman Cho Yang-ho and his three children together hold a 100 percent stake in CyberSky.
According to FTC, CyberSky has been given a preferred contract to publish Korean Air’s Morning Calm and other magazines, and operates the carrier’s online duty free called CyberSky Shop. This exclusive deal has deprived other firms of business opportunities.
Cho and his children are believed to have amassed great deal of wealth by receiving dividends from CyberSky.
Such exclusive deals among affiliates of business groups has been criticized because it increases the wealth of controlling family members who hold substantial stakes in the benefiting entities.
Hyundai Group has also been under investigation for alleged inter-subsidiary dealings between Hyundai Logistics and other group units. The anti-trust agency suspects that group units had an exclusive dealing with Hyundai Logistics, barring other logistics firms from doing business with them.
FTC is also looking into Lotte Group, which acquired Hyundai Logistics in January, for possible unfair business contracts between the firm and other Lotte units.
Investigators say that there are two or three other affiliates of conglomerates that are under probe.
FTC is reportedly looking into CJ, GS, Hanwha and other groups, which operate a system integration unit, to check whether they have been engaged in illegal intra-group dealings.
FTC officials have said they will impose a fine on the violators and refer them to the prosecution if necessary.
“We will do everything we can to stamp out such unfair practices,” a FTC official said.