SEJONG, May 25 (Korea Bizwire) — The nominee of South Korea’s corporate watchdog said Wednesday that the government will strengthen punishments against “funneling of business” practices within conglomerates as he pushes forward his pledge to establish fair trade.
“It is necessary to intensify financial sanctions such as increasing fines against illegal intra-group trading,” Kim Sang-jo, who was appointed as the chairman of the Fair Trade Commission (FTC), said in a report submitted to the National Assembly for a confirmation hearing. The schedule of Kim’s hearing has yet to be fixed.
He also said he will revise the entire penalty system when he takes office in a way to make it possible for the watchdog to impose a meaningful financial burden on violators.
The South Korean fair trade law forbids unfair support to affiliates inside a business group that are effectively owned by the main stakeholders of the conglomerate. Such trading is blamed for allowing so-called owner families an easy way to make huge sums of money by winning lucrative contracts with other companies in the group. This is seen as undermining the principle of fair competition.
To oversee such practices in a more effective way, the FTC chairman nominee said he will set up a new division within the agency that handles antitrust policies on conglomerates and monitors them.
Kim, who has been a renowned civic activist for his minority shareholder movement, said he also has a plan to expand the class action suit, which has been adopted only in securities-related cases in South Korea.
“In order to give an effective remedy to the majority of victims, it is necessary to introduce the class suit system to other areas,” he said, adding that he will take gradual steps to help the system in a stable and safe manner.