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Tougher rule to subject more chaebol firms to inter-unit trading ban

Nearly 30 subsidiaries of South Korea's family-controlled conglomerates may be newly subject to a ban on inter-affiliate trading when the nation's antitrust watchdog toughens a related rule, a market tracker said Wednesday.

In a policy report last month, the Fair Trade Commission said it will seek to revise the law forbidding inter-affiliate trading within a business group whose owner and family hold 30 percent or more of listed affiliates by lowering the threshold to 20 percent. For unlisted subsidiaries, the limit is 20 percent.

Should the law be amended as reported, 28 more subsidiaries of the 57 conglomerates with assets of 5 trillion won or more would be subject to the ban on inter-affiliate trading, according to CEO Score, a website that monitors conglomerates.

Fair Trade Commission Chairman Kim Sang-jo (Yonhap)
Fair Trade Commission Chairman Kim Sang-jo (Yonhap)

Currently, the rule governs 203 units out of 1,802 subsidiaries belonging to conglomerates, known here as chaebol.

Such trading is blamed for allowing owner families to easily net large profits by having subsidiaries award lucrative contracts to each other, undermining the principle of fair competition.

CEO Score said the revision of the law would have a considerable impact on major business groups as the 28 companies are their cash cows or play a key role in their governance structure.

The firms include top life insurer Samsung Life Insurance Co.; Hyundai Glovis Co., the auto freight unit of South Korea's Hyundai Motor Group; and SK D&D, a property development arm of SK Group. (Yonhap)