FTC rules that chaebol must publicize branding contracts

Korea’s corporate watchdog said Thursday that under revised rules, conglomerates with assets of over 5 trillion won ($4.7 billion) will be required to publicize the details of contracts for brand licenses sold to their affiliates every year in order to improve transparency.

According to the Fair Trade Commission (FTC), 20 holding companies were found to have earned 931 billion won in 2016 by selling their brand licenses to 277 affiliates, up from 865 billion won in 2014.

But only 33 affiliates, or 11.9 percent, made public their contracts for brand licenses, according to the FTC.

There have been no unified accounting rules on how to treat brand license fees on corporate balance sheets.

But under the amended rules, the FTC made it clear that brands are regarded as intangible assets, and license fees are transactions of those intangible assets.

FTC Chairman Kim Sang-jo has vowed to improve ingrained business practices that critics say benefit large conglomerates at the expense of small companies and street merchants.

The FTC also said earlier that it would look into holding companies’ revenue sources and other details as part of efforts to improve their management transparency.

The watchdog has asked a total of 62 holding companies to submit related data by mid-April.

Korea’s conglomerates have been under fire for years as they largely rely on controversial cross-shareholding arrangements among their affiliated companies to strengthen their owner families’ control over the entire group.

Yonhap