SEJONG, Dec. 15 (Korea Bizwire) — The head of South Korea’s antitrust watchdog said he expects the country’s large businesses groups to voluntarily reform their cobweb-like family-run governance structures to meet market expectations and promote fair competition.
“I once again reaffirm that I will never be pushy and coercive in carrying out reform on conglomerates,” Fair Trade Commission (FTC) Chairman Kim Sang-jo said in a meeting with reporters on Thursday. “They are fully aware of what they have to do and I hope they will change themselves on their own volition.”
South Korea’s conglomerates have been under fire for years for largely relying on controversial cross-shareholding arrangements among their affiliated companies to strengthen their owner families’ control over the entire group.
The top corporate regulator has pledged to tackle such practices and strengthen the role of the FTC to resolve the matter.
Kim, a former civic activist, said he will keep monitoring large business groups who abuse their market dominance and exert undue pressure on subcontractors and small-time enterprises.
The FTC chief also vowed to carry out sweeping reforms to root out unfair business practices and strengthen consumer protection.
Earlier, the FTC unveiled a plan to impose punitive damages of up to three times the actual losses incurred by illegal business practices, such as unfair payment, returns and cutting back supplied goods, that occur between large shopping mall operators and smaller partners.
The South Korean distribution industry is currently led by huge retailers, department stores and discount outlets that lease their spaces to small businesses. Big-name retail giants such as Lotte, Shinsegae and Hyundai Department Store take up the bulk of the market share and wield great influence over the entire industry.
“The steps we draw up will be predictable and irreversible, and our society will be better going forward on the back of such measures,” Kim said.
“Tangible outcomes will be created … but I will not be in hurry,” he said.
The FTC chief said one-sided distribution stemming from unfair transaction terms between large firms and smaller ones helped deepen the economic polarization in the country.
“Going forward, the FTC will focus on improving transaction terms between large players and small players,” Kim said in a seminar in Seoul on Friday. He added that a set of measures to improve subcontractors’ terms of transactions with large firms will be unveiled this year.
He said creating a level playing field for small and medium-sized companies is very important in a country where family-controlled conglomerates known as chaebol have dominated the economy for decades.