FTC chair sets sights on chaebol reform
“[The Fair Trade Commission] should work to improve the governance structure of conglomerates and prevent [them] from exploiting their economic influence,” said Kim in a statement released on Sunday.
“Through more scrupulous analysis and finding proof of allegations, we have to prevent [conglomerates] from inheriting management rights by manipulating the law and exclusively offering work to affiliates, which would damage the trade foundation with SMEs,” Kim said.
Kim’s statement came after the FTC last month overturned a previous decision, made during the Park Geun-hye administration, which allowed Samsung SDI to only sell half of the stake it owned in a merger between Samsung C&T and Cheil Industries. Samsung C&T is the de facto holding company of Samsung Group. The FTC ordered Samsung SDI to sell the remaining stake it has in Samsung C&T in the next six months.
This move was considered to be the FTC’s first step in forcing conglomerates to change their governance structure under the former civic activist and economics professor Kim.
Family-owned conglomerates including Samsung, Hyundai Motor and Lotte have traditionally controlled many of their affiliates with small family-owned stakes through a system known as cross-shareholding.
“It is [our] important project to improve related regulations by analyzing and publicly disclosing problems that are found through accurately understanding the situation of conglomerates including the profit structure of holding companies as well as [conglomerates’] non-profit companies,” the FTC chairman said.
The FTC last month said it has asked 57 conglomerates to submit information regarding their non-profit corporations. These companies are thought to be used to maintain control of conglomerates without bearing tax liability.
The FTC Chairman also noted the FTC’s role in creating a fair economy through innovation of SMEs.
“As an extension of last year’s measures, we not only need to pursue fairness in transactions between conglomerates and SMEs but also the horizontal network of SMEs and small commerce so that they could stand on their own,” Kim said. “In order to do so we would need to strengthen the negotiation power of SMEs as well as small commerce so that the business contracts could be executed accordingly and strengthen the system for these small businesses to counter major retailers and franchise headquarters.”
Kim also noted that the FTC will focus on creating a competitive environment by finding regulations that prevent different industries from converging or holding back innovative technologies like big data and health care.
At the same time it will aggressively counter any manipulation of market fairness such as monopolies created in new industries, including ICT as well as mergers and acquisitions, that limit fair competition and collusion, which affects the livelihoods of the public while wasting government budgets.
BY LEE HO-JEONG [firstname.lastname@example.org]