Antitrust watchdog chairman vows to enhance monitoring of mid-sized companies

Korea Fair Trade Commission (FTC) Chairman Han Ki-jeong greets reporters at a meeting held at the government complex in Sejong City on Sep. 14. [Photo by Yonhap]

The chairman of South Korea’s antitrust watchdog, which has been expanding its investigative scope, has vowed to enhance monitoring of mid-sized business groups.

“We will closely monitor the internal transactions of mid-sized conglomerates and promptly investigate and correct any suspected violations of the law,” Korea Fair Trade Commission (FTC) Chairman Han Ki-jeong said at a press meeting to mark the first anniversary of his appointment at the government complex in Sejong City on Thursday. “Mid-sized conglomerates have a high proportion of family members in their boards of directors and lack internal and external oversight mechanisms, necessitating active monitoring.” He added that companies in industries including pharmaceuticals, apparel, and food and beverages are closely tied to everyday life but have remained a blind spot because they are not large conglomerates.

In fact, since 2018, there have been 21 unfair internal transaction cases for large conglomerates versus 5 cases for mid-sized companies, suggesting that surveillance was disproportionately focused on large conglomerates. Currently, there are 722 mid-sized and 268 large companies among listed companies, which means that there are three times as many mid-sized companies as large ones but only 25 percent of them have been sanctioned for unfair internal transactions.

The FTC also plans to ease the criteria to classify dominant market operators solely based on market share to reduce the side effects of startups being classified as dominant operators.

This relaxation in the criteria will be the first in 16 years. Under the current Monopoly Regulation and Fair Trade Act, a business with annual sales or purchases of 4 billion won or more is considered a market-dominant operator if the share owned by one business is 50 percent or more and the combined share of three businesses is 75 percent or more (excluding businesses with less than 10 percent). The annual sales or purchases criterion will be raised to 8 billion won so that growing companies will not be considered dominant market operators, even if they meet the market share criteria.

Han also expressed his intention to improve the review process for mergers and acquisitions (M&A). To promote corporate venture capital (CVC) investment, he mentioned the possibility of raising the current limit of 40 percent for external funds to enable more external investors or joint investments with other CVCs.

Regarding the subcontractor payment linkage system that will be implemented from October, the FTC plans to provide a grace period until the end of the year to encourage the system’s adoption.

On the same day that Han made these remarks, the FTC launched on-site investigations into Ottogi Corp. and Kwangdong Pharmaceutical Co. The FTC reportedly caught some mid-sized companies, including Ottogi and Kwangdong Pharmaceutical, engaging in unfair support for subsidiaries while monitoring mid-sized business groups.

So far, FTC’s investigations for unfair internal transactions have primarily targeted large business groups with assets of over 5 trillion won ($3.76 billion). The FTC plans to conclude its investigation into whether the country’s three major mobile carriers colluded on sales incentives as well as bank mortgage terms and conditions, which it has been investigating since February, by the end of 2023. The antitrust watchdog will also complete its investigation into whether there was collusion on the bidding for supervisory services ordered by Korea Land & Housing Corp. (LH), including in the recent controversy of missing reinforcing bars in 13 apartments, and begin the deliberation process. An investigation into false and exaggerated advertisements by private education companies will also be finalized later this month.