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FTC bureau celebrates 1st year

Investigative group dealt out 40 billion won in fines to chaebol
Sept 11,2018
The Fair Trade Commission’s business group bureau, which celebrates its first anniversary this month, has so far slapped fines of over 40 billion won ($35.46 million) on conglomerates and turned over 13 people to the prosecution.

The bureau focuses mainly on antitrust acts, such as illegal allocation of business to family-owned companies by chaebol. It was first created by the FTC chairman and former civic activist Kim Sang-jo on Sept. 22.

The bureau’s first achievement was hitting Hite Jinro with a 10.7 billion won fine for illegal deals with Park Tae-young, a third-generation member of the alcohol manufacturer’s founding family.

The 40 year-old is the eldest son of Hite Jinro’s Chairman Park Moon-deuk and the vice president of Hite Jinro Holdings.

The FTC found that a supplier was paying 2 won for every beer can it manufactured for Hite Jinro to a company owned by Park.

It even had to purchase the aluminum for cans from Park’s company. Hite Jinro was slapped with a 10.7 billion won fine, while Park was reported to the prosecutors’ office.

In April, the FTC slapped a 3 billion won fine on Hyosung Group while turning over its chairman, Cho Hyun-joon, to the prosecution for using the group to finance a company that he owned. The company was on the verge of being ousted from the market, as it was facing dire financial straits.

In June LS-Nikko Copper Chairman John Koo was reported to the prosecutor’s office, while three LSS Group affiliates were fined 26 billion won in total for reportedly paying 19.7 billion won to an affiliate that 12 members of the founding family owns a combined 49 percent stake in.

The FTC bureau also revealed that Lee Joong-keun, the chairman of construction conglomerate Booyoung, used other people’s identities to hold shares in five affiliates.

It also turned over the chairman of Hanjin Group, which includes the country’s biggest airliner Korean Air, for failing to properly report companies owned by founding family members.

But the bureau’s work didn’t always focus on investigating the illegal activities committed by the conglomerate and their founding families. It also worked to improve past practices.

It has encouraged conglomerates to reform their governance structure, including cross-shareholding.

As a result, the number of business groups that used complicated webs of ownership to allow the founding family to have a large influence on affiliates without owning large stakes in the companies shrunk to 41 in April from 282 at the end of last year.

FTC Chairman Kim, a long-time activist who has garnered the nickname “chaebol sniper,” has pushed to make the Korean economy fairer. This includes leveling the playing field for smaller companies that have been victimized by conglomerates, who give lucrative contracts to affiliates, which pads the pockets of their founding families.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]