Most intragroup deals not public

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Most intragroup deals not public

Nearly 90 percent of intragroup deals carried out between affiliates of major conglomerates last year were granted without open bidding, the antitrust watchdog said Wednesday.

The results are based on an analysis by the Fair Trade Commission of business deals and sales data compiled by 20 affiliates of the nation’s leading business groups. They consist of eight advertising, eight systems integration and four logistics companies.

The companies were found to have received 9.16 trillion won ($8.23 billion) worth of business orders from other affiliates through intragroup trading last year. Of the total, 8.08 trillion won was granted without public auction, according to the FTC.

The FTC this year has been rigorously drilling into possible business malpractices that limit the growth of small and midsize companies as part of the wider government campaign in promoting shared growth. The intragroup deals have been a long-time practice among Korean companies.

By sector, logistics and advertising firms received 99 percent and 96 percent of their deals without competition. For systems integration companies, the ratio was 78 percent, the FTC said. The results confirmed suspicions that the nation’s leading conglomerates engage in intragroup trading aimed at granting massive amounts of orders and deals to their affiliates.

The watchdog has been investigating such suspicions in order to crack down on unfair business practices it sees as a hindrance to a fair competition environment for smaller firms, which are not affiliated with conglomerates.

“We have confirmed that affiliates belonging to large business groups tend to grant more orders to other affiliates without public competition,” the FTC said. “An isolated market was formed within the conglomerates and its affiliates.”

The fair trade agency stressed that it will make diverse efforts to tackle such business practices.


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