Chaebol earn trillions from affiliate brand fees

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Chaebol earn trillions from affiliate brand fees

Thirty-five conglomerates earned 1.28 trillion won ($1.07 billion) last year by selling brand licenses to their affiliates, Korea’s antitrust watchdog said Tuesday, amid concerns that such transactions may help owners of conglomerates pocket profits.

Brand commission fees earned by 35 conglomerates last year rose 11.5 percent on year, the Fair Trade Commission (FTC) said in a statement.

LG and SK topped the list by charging their affiliates 268.4 billion won and 233.2 billion won, respectively, last year.

Hanwha, Lotte and CJ also earned 152.9 billion won, 103.2 billion won and 97.8 billion won each in brand license fees, according to the FTC.

Conglomerates with assets of over 5 trillion won are required to publicize the details of contracts for brand licenses sold to their affiliates every year in order to improve transparency.

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.

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.

The government has encouraged such big-name business groups to convert themselves into holding companies to resolve their cobweb-like family-run governance structures.

But concerns have been rising that the scheme is being used to further strengthen the grip of business group owners over many companies.

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