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Hanjin Group fined W1.43b for unjust gains

South Korea’s antitrust agency slapped the owner family of Hanjin Group with a 1.43 billion won ($1.2 million) fine for seeking personal gains from internal transactions between the group‘s key affiliate Korean Air and two other affiliates.

The Fair Trade Commission will lodge a complaint against Cho Won-tae, the group’s apparent heir, to the prosecution, it said Sunday.

The group’s flagship subsidiary Korean Air favored Cybersky, an online duty-free shopping unit, and exempted the company from paying the commission required on products sold in-flight between January 2009 and March 2015.

Cybersky was owned by Hanjin Group Chairman Cho Yang-ho‘s three children -- Hyun-ah, Won-tae and Hyun-min -- until Oct. 2015. It is now wholly owned by Korean Air as the airline purchased all of the shares in the unit in November last year.

The national flag carrier also had been providing all of its gains from online advertising at Cybersky to the company since April 2009, the FTC found.  

The antitrust agency also confirmed that the airline made unfairly high payments to Uniconverse, a call center operator, for its equipment and maintenance services to Korean Air.

Uniconverse was also owned by the three children until March before they handed over the business to Hanjin Information & Telecommunication, another group unit, in April. 

Korean Air had Uniconverse operate a call center for the airline, even though the firm had no such business, the FTC inspection found.

The FTC issued a correction order to the national flag carrier to fix the unfair deals with Cybersky and Uniconverse. The agency slapped the airline with a 715 million won fine, while imposing 103 million won on Cybersky and 612 million won on Uniconverse.

“Cybersky and Uniconverse violated the antitrust law by accepting excess payments and other benefits from Korean Air,” the FTC said in a press release.

Some media reports criticized the FTC announcement, saying the fines are lenient punishments on the owner family.

“Since the law banning owner families from taking personal gains was implemented February last year, the violation duration was short-lived and the value of related transactions was not significant, so the fines are not large,” an FTC official explained.

According to the agency, Hanjin Group is the 15th largest conglomerate with 38 affiliates under its wing with a combined asset of 37 trillion won as of April. 

Instead, the FTC will accuse Cho Won-tae, an executive vice president of Korean Air and the airline to the prosecution for a probe into insider trading in which the airline offered unfair profits to the subsidiaries. Cho is in charge of the airline’s call center operations.  

Cho Won-tae (Yonhap)
Cho Won-tae (Yonhap)


“We have addressed all of the problems ordered by the FTC and will seek a legal process to explain our position on the resolution for prosecution,” a spokesman at Korean Air said. “The airline’s acquisition of Cybersky and transfer of the call center business were made at the order of the FTC.”

By Song Su-hyun (song@heraldcorp.com)







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