South Korea’s leading conglomerates have taken steps to dodge the government’s restrictions on unfair intra-group trading that aim to prevent market-distorting deals, an opposition lawmaker said Thursday.
According to Rep. Shin Hak-yong, 13 affiliates of family-run business groups called chaebol here have been excluded from the rules as of April. These companies were on the watch list in February 2014, when the Fair Trade Commission implemented measures to prevent preferential funneling of business and profits between affiliates in the same conglomerate.
This practice effectively shuts out companies not within the group from winning such deals. It has also been used to generate considerable profits for family members of conglomerate owners, who then use the earnings to lay the foundation for an eventual takeover of the group without paying inheritance or gift taxes.
The New Politics Alliance for Democracy lawmaker said Samsung, South Korea’s largest chaebol, managed to exclude two affiliates from the restriction, while Hyundai Motor Group, the world’s fifth-largest automotive conglomerate, managed to get four off the FTC’s list, including Hyundai Glovis Co., a logistics support firm listed on the stock exchange.
Others groups, such as Hanwha, CJ, Dongbu, Hyosung, KCC and Daesung, all removed at least one affiliate from the restrictions.
“The conglomerates have been moving to sidestep the restrictions by artificially reducing the stakes held by family members,” the lawmaker claimed. He argued that the FTC’s rules now have loopholes that will hurt their effectiveness.
The restrictions apply to companies where a family member of the business group’s owner holds more than a 30 percent stake. Affiliates of conglomerates with assets exceeding 5 trillion won that are barred from cross-shareholding have been placed on the list that currently stands at 187 companies.
Related to the allegations made, the FTC said while some companies have been taken off the list because of stake sales or mergers, the total number only dipped by one compared with last year.
The antitrust watchdog pointed out that just last month it started a probe to determine if the Hanjin and Hyundai groups engaged in intra-group trading that unfairly generated profits for affiliates. (Yonhap)
