Hyundai affiliates finedFour subsidiaries of Hyundai Group were fined a total of 1.29 billion won ($1.1 million) by the Fair Trade Commission (FTC) on Sunday for violating the ban on internal transactions within a business group.
It is the first punishment by the country’s antitrust agency on a group’s internal transactions since the ban was first enforced in 2015.
The FTC announced it found that Hyundai Securities and Hyundai Logistics, two major affiliates of Hyundai Group, placed unfair orders on HST and 3B, small firms owned by Hyundai family members. The orders helped the owner families gain more profits, the FTC said.
Hyundai Securities, the sixth-largest brokerage firm by asset in Korea, allegedly arranged a deal to rent some 150 multi-function business printers from HST in 2012, the FTC said.
HST is a computer equipment supplying unit of the group, fully owned by the sister and brother-in-law of Hyun Jeong-eun, the group’s chairwoman.
“HST requested Hyundai Securities involve the company in the existing transaction relations between the securities firm and Xerox,” the FTC said.
The securities unit signed a direct deal to rent printers from Xerox in July 2010. But at the request of HST, the brokerage let HST meddle in between itself and Xerox in 2012. HST rented printers from Xerox at 168,300 won per unit for a month, and rented them out to Hyundai Securities for 187,000 won per month, taking a 10 percent margin.
Hyundai Logistics, the country’s second-biggest delivery service firm by market share, chose 3B, a purchasing business, owned by another relative of the chairwoman in 2012 and bought packing slips at prices that were about 45 percent higher than the market average. The logistics unit worked with its old packing-slip contractor for about a year.
“3B has secured a significant market share of 12.4 percent in 2014 in the packing-slip market with the backing of Hyundai Group,” the FTC said.
According to the commission, Hyundai Securities helped the group chief’s relatives raise an extra 540 million won, while Hyundai Logistics contributed 1.4 billion won through unfair internal transactions.
“This is the first time that the FTC has imposed a penalty on a large business group’s unfair business transactions for the sake of owner family’s personal gains,” said Jung Chang-wook, director of the anti-monopoly division at the FTC.
Since February of 2015, Korea’s antitrust law was revised to ban such intra-affiliate trading practices within conglomerates that are on the watch list of FTC. Business groups with more than 5 trillion won in their total assets are put on the FTC list that is revised every year. This year, 65 groups made it to the list. The groups are also banned from making mutual share investments.
Local business groups run by owner families have come under fire for helping their owner families increase personal profits by placing orders on subsidiaries owned by their family members or relatives. ?
BY SONG SU-HYUN [email@example.com]