Chaebol should show restraint

Insider trading by large conglomerates has reached a dangerous level, according to a report by an antitrust watchdog. Cross-affiliate deals amounted to 200 trillion won ($176 billion) among 46 business groups as of last year, the share increasing from a year ago despite criticism about crony business practices among affiliates.

The Fair Trade Commission’s findings laid bare these unfair and questionable business practices in actual numbers. Inside deals among affiliates where managing sons, daughters and grandchildren of business founders and owners have more than a 50 percent stake reached 56.3 percent. The cash deals were mostly carried out via private contracts.

Conglomerates argue that insider trading among affiliates with stakes in one another is unavoidable. In-house business practices of conglomerates cannot be entirely criticized as they have helped build multinational chaebol like Samsung, LG, Hyundai and SK.

German and Japanese manufacturers also benefited from the top-down and interlocked organization and operation system. But when internal transactions are in excess, they can undermine the parent group.

For instance, advertising, system information or logistics hardly help conglomerates.

Private interaffiliate deals usually take place among unprofitable subsidiaries, eating up opportunities that could have gone to more competitive outside enterprises specializing in the field. Without fair competition, corporate and social efficacy is whittled down.

Without constraint, incestuous business practices will become rampant. Resentment against large companies will increase while other, smaller independent enterprises lose their spirit. The anti-big and rich campaigns and calls for economic justice are the aftereffects.

Society must toughen up against unfair and antitrust business practices. If large companies continue with sprawling preferential, insider and cross-affiliate trades, they will only invite public interference and crackdowns from authorities. To prevent this, large conglomerates should stop branching out and cut off unprofitable subsidiaries.