South Korea will fix loopholes in antitrust rules to prevent owner family of big conglomerates from fattening wealth through spin-offs in family business.

According to the Fair Trade Commission (FTC)’s administrative order on the revised Fair Trade Act taking effect on July 14, scrutiny on inside trade will be toughened on conglomerate family units that spun off.

Under the current law, business units run by chaebol owner’s family and relatives, including spouses, blood relatives within second cousins and in-laws within cousins, can be separated from the chaebol group on condition that they meet a set of requirements. But they must report their transaction records for three years after the separation to the FTC.

But some business groups have taken advantage of the rule to lower their family ownership to below the threshold of 30 percent to avoid tougher intra-group trade regulations. In Korea, business group affiliates whose owner families hold more than 30 percent stake in listed companies and 20 percent fin non-listed firms are subject to strong inter-affiliate trading scrutiny.

The FTC’s chief business group policy team Sung Kyung-je gave some examples at a seminar with reporters on Monday.

Family ownership in LG Corp., the holding entity of LG Group, has been cut from 31.96 percent to 29.10 percent after excluding 2.86 percent holding in Koo Yun-kyung, sister of LG Group Chairman Koo Kwang-mo. Yun-kyung was separated from the family ownership after her husband founded an independent asset management company East Arrow Partners in June 2019. But the company closed down just six months later and reported zero sales during the period.

Family holding in SK Holdings Co. has been lowered to 29.44 percent from 30.62 percent after SK Group Chairman Chey Tae-won gave 1.18 percent stake to relatives who are not included in the family member group. LS Group’s Yesco Holdings Co.’s family owners also hold 27.14 percent, down from 36.94 percent, after a relative separated from the ownership bought a stake in the holding entity in 2007.

In order to close the regulatory loopholes, the revised bill will require business units run by separated family members to submit their trading records with the business group for three years. If the independent company shutters, the separation is canceled and the family members or relatives must be re-included as an owner family member.

By Choi Mira

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