FTC goes light on chaebolOne out of every four conglomerates appears to have avoided annual inspections of internal trading activities by the fair trade authority, according to findings by a lawmaker, raising questions about lax antitrust oversight.
According to a report released by Saenuri Party Rep. Yu Eui-dong during Thursday’s parliamentary audit of the Korea Fair Trade Commission (FTC), inspections of the nation’s 48 conglomerates over the past decade were pretty light.
Of 48 conglomerates, 13 have never had internal investment activities among affiliates examined by the FTC over the past decade. Those companies are Daewoo E&C, S-Oil, Mirae Asset, Hanjin Heavy Industries, Halla, Homeplus, Kyobo Life Insurance, AmorePacific, E-Land, Booyoung, SeAH, Taeyoung and Samchully.
Another 15 conglomerates, including Hyundai Department Store, Hyosung, KCC, Hankook Tire and KT&G, were inspected only once in the past 10 years, and the last time they were inspected was in 2003 and 2004.
The 20 largest conglomerates including Samsung, Hyundai and SK usually are inspected once every four to five years, Yu found, but the FTC did not punish them very harshly.
In Korea, the FTC does inspections of the internal investments of conglomerates twice a year.
Under local fair trade law, conglomerates with assets of 5 trillion won ($4.3 billion) are limited from undertaking direct cross investments or stock exchanges among their affiliates. The conglomerates are also prohibited from getting involved in the investment decisions of its financial or insurance affiliates.
These requirements are aimed at strengthening the role of nonexecutive directors to prevent unfair investments or businesses practices within the group.
Every business transaction among affiliates worth more than 5 percent of a group’s total assets must be approved at a board meeting and reported to the FTC.
When Yu obtained the inspection records, he found that conglomerates often skipped these obligations.
Since 2011, the FTC found 230 cases in which conglomerates failed to make regular public notices of their internal investment activities, but the fair trade watchdog only levied penalties of 5 billion won on those cases.
Of the 230 cases, 70 were public notices made after deadlines had passed, and 65 were failures to make the notices. In 41 cases, board permissions and public notices were not complied with.
“The FTC held inspections every year and violations have been detected,” Yu said. “The commission should strengthen penalties.”
BY KIM JI-YOON [firstname.lastname@example.org]