South Korea’s antitrust watchdog has launched a probe into Harim Group, the country’s largest poultry processor, suspecting irregularities in the way chairman Kim Hong-kuk transferred the company’s managerial control to his son.

It marks the agency’s first ex officio investigation after Kim Sang-jo, a hard-line antagonist of family-run chaebol establishment, took charge of the Fair Trade Commission (FTC) last month.

Experts speculate this could be a harbinger of chaebol reform vowed by the new administration.

The FTC started the probe after evidence of suspicious transactions was found across Harim Group in the process of monitoring of the group’s inter-subsidiary practices, according to sources on Wednesday.

The agency has been monitoring inter-subsidiary practices of 45 conglomerates since last March.

Harim Group was put on the FTC’s scrutiny last year as its group-wide asset multiplied to 10.5 trillion won ($9.33 billion) from 3.5 trillion won in 2011 after sharp growth mainly on property acquisition.

The FTC is looking closely into whether there were improper deals during the transfer of chairman Kim’s stake in non-listed company Orpum to his son Jun-young five years ago. Orpum is at the apex of the governance structure of Harim Group.

The 25-year-old heir paid just 10 billion won in inheritance taxes for the stake transfer in the group with assets around 10 trillion won. Controversy became more intense as his tax payment was found to be financed through a capital reduction of Orpum.

The FTC also believes that Harim Group’s vertical integration from poultry feed supply to processing to distribution may facilitate inter-subsidiary transactions and stifle market competition.

Harim is denying all allegations.

By Baek Sang-kyung and Seok Min-soo

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]