Subsidiaries make up more of groups’ transactions

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Subsidiaries make up more of groups’ transactions

The ratio of transactions among affiliates of large business groups in Korea has increased over the past year with most of the deals being carried out without a public bidding process, the antitrust watchdog said yesterday.

According to a report by the Fair Trade Commission, the so-called inter-affiliate contracts of 46 business groups came to 186.3 trillion won ($164.1 billion), or 13.2 percent of their total combined sales of 1,407.2 trillion won.

That is up from 12 percent tallied a year earlier. The amount also represented a 28.7 percent increase over the same period.

Those figures are based on a review of sales and contract data compiled by 1,373 affiliates of the business groups until the end of May, the watchdog said.

The FTC has been pushing to toughen its stance on such inter-affiliate deals among large conglomerates as part of efforts to establish a fair and competition-driven business environment.

Such deals among affiliates have been under scrutiny as critics claim that they tend to be carried out without public bidding and deprive smaller firms of the chance to compete.

The report showed that STX Group had the highest rate of transactions with affiliates at 27.6 percent. SK and Hyundai Motor followed with ratios of 22.1 percent and 20.7 percent, respectively.

In terms of values of inter-affiliate transactions, Samsung Group, Korea’s largest conglomerate, came first with 35.3 trillion won, followed by SK and Hyundai Motor with 34.2 trillion won and 32.2 trillion won, respectively, the report showed.

Of the total, 89.7 percent of deals were signed through private contracts, according to the report.

In particular, the corresponding ratio of deals in the system integration, logistical and advertisement sectors, which were under fire for the widespread practice of favoring affiliates in awarding deals, inched up to 91.8 percent from 88 percent tallied later in 2010, the report showed.

The FTC said that it will step up its monitoring of inter-affiliate trading among large conglomerates in a bid to root out any possible shady and competition-restricting business practices.


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