Stricter Rules Eyed for 'Unfair' Deals Favoring Firms Run by Chaebol Founding Family Members | Be Korea-savvy

Stricter Rules Eyed for ‘Unfair’ Deals Favoring Firms Run by Chaebol Founding Family Members

(image: KobizMedia/ Korea Bizwire)

(image: KobizMedia/ Korea Bizwire)

SEJONG, Apr. 10 (Korea Bizwire) South Korea’s corporate watchdog said Tuesday that the revised enforcement ordinance of anti-trust laws will restrict deals that favor companies owned by the founding family members of large businesses.

The change that will come into force soon aims to prevent arrangements that give unfair advantages to certain firms and undermine the principle of fair competition.

Big business groups, known as chaebol here, have in recent years moved to sever ties with affiliates run by founders’ family members to avoid tougher regulations on intra-group transactions, which will come into force soon.

Chaebol have come under scrutiny over excessive intra-group deals, many of which benefit such affiliates, and over interlocking shareholding structures among affiliates that allow the “owners” of these conglomerates to exercise control over numerous affiliates without controlling large stakes.

Not all inter-subsidiary dealings are unlawful, but certain cases are prohibited under the antitrust law as such practices can and often are used to boost the value of smaller affiliates or even paper companies set up and owned by founding family members.

In a policy report early this year, the Fair Trade Commission said it will seek to revise the law forbidding inter-affiliate trading within a business group whose owner and family hold 30 percent or more of listed affiliates by lowering the threshold to 20 percent. For unlisted subsidiaries, the limit is 20 percent.


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