Shame on nepotismCompanies affiliated with Hyundai Group confront fines for unfairly commissioning their works to other subsidiaries owned by Hyun Jeong-eun, Huyndai chairwoman and the widow of former chairman Chung Mong-hun. The penalty is the first of its kind since the Fair Trade Law — which prohibits chaebol owner families from making unfair profits from shady deals with their affiliates — took effect in February last year.
The Fair Trade Commission on Sunday levied 1.29 billion won in fines each on Hyundai Securities and Hyundai Logistics for giving unfair treatment to HST and 3B — both owned by the chairwoman’s relatives. The commission has sent its complaint about Hyundai Logistics to the prosecution.
According to the Fair Trade Commission, Chairwoman Hyun’s sister and her husband own 90 percent of the stakes in HST, while 3B is 100 percent owned by the husband and his two sons. Hyundai Securities could directly transact with Xerox, but because of the ties it had to go through HST to make a contract with Xerox. The unnecessary “tolls” accounted for a whopping 41 percent of HST’s annual sales of 10 billion won ($8.54 million) in 2014. Hyundai Logistics, too, unfairly offered more than 5.6 billion won in profit to 3B in the last four years by purchasing its delivery service invoices at a much higher price. Chairwoman Hyun’s relatives made unfair profits of 1.4 billion won from those shady deals during the same period.
In 2014 and 2015, Hyundai Group faced a serious financial crisis due to Hyundai Merchant Marine’s huge debt. At the time, the conglomerate even tried to sell off Hyundai Securities to help the group stay afloat. We are dumbfounded that Hyundai’s affiliates gave unfair benefits to the relatives of the owner family under such dire circumstances. Who would sympathize with the government’s campaign to bail out the cash-strapped Hyundai Merchant Marine through taxpayers’ money?
Assigning works to affiliated companies only constitutes a serious crime as it drives out existing suppliers to replace them with affiliates with family connections. That’s why the Fair Trade Act forbade 85 local companies from engaging in such malpractices and punishes them with up to three years in jail or 200 million won in fines. But the Fair Trade Commission only ended up accusing board members of Hyundai Securities and Hyundai Logistics to the prosecution despite its earlier pledge to end the inappropriate practice once and for all. The commission is currently probing into similar suspicions over four other business groups — Hanjin, HeitJinro, Hanwha and CJ. If the prosecution fails to meet public expectations, it’s better to quit the investigation.
JoongAng Ilbo, May 16, Page 30