Jeong Bo-reum, an official from the Fair Trade Commission, announces the outcome of its review of inter-affiliate transactions of companies at the government complex building in Sejong, Nov. 26. Yonhap
Transactions among affiliates of Korea's 10 largest family-run conglomerates, known as chaebol, continued to remain substantial in 2023 despite government efforts to regulate such practices that could undermine fair competition, the antitrust regulator said Tuesday.
According to the Fair Trade Commission (FTC), the total value of inter-affiliate transactions by the top 10 chaebol amounted to 194.8 trillion won ($138.5 billion) last year, slightly down from 196.4 trillion won in 2022.
However, their proportion in all business contracts signed by those conglomerates rose to 14.5 percent in 2023 from 13.9 percent the previous year, according to the FTC.
"The slight decrease in the value of inter-affiliate transactions last year was entirely due to reduced overall sales," said Jeong Bo-reum, an FTC official.
The 10 major conglomerates include Samsung Group, the country's largest conglomerate and home to global memory chip leader Samsung Electronics; multi-industry giant SK Group; and leading automaker Hyundai Motor.
Internal trading within chaebol has often been criticized for enabling owner families to secure significant profits by awarding lucrative contracts to their subsidiaries.
The FTC highlighted that affiliates with high ownership stakes held by second-generation family members saw a sharp rise in internal trading last year.
For instance, the proportion of internal transactions between subsidiaries in firms where second-generation family members held more than 50 percent ownership sharply rose from 25.8 percent in 2022 to 29 percent in 2023.
"As in previous years, conglomerates with higher shares held by the owner families or second-generation family members tended to have higher levels of internal transactions," the FTC said.
The government has encouraged family-run conglomerates to transition into holding company structures in an effort to simplify their complex and opaque governance systems. However, such efforts have had limited success in curbing internal trading.
The FTC stressed that while transaction volumes or their ratio in overall sales may not be used to definitively determine unfair practices, regular checks on inter-affiliate transactions and continuous oversight are crucial to preventing unfair practices.
"We will continue to closely monitor inter-affiliate transactions, particularly those concentrated within owner families and their second generations by evaluating whether such practices may be linked to succession planning or unfair personal gains," Jeong said.
In total, 88 business groups, including the 10 chaebol, were subject to annual FTC oversight last year, with the combined value of inter-affiliate transactions reaching 704.4 trillion won.
Among these, biopharmaceutical firm Celltrion Inc. reported the highest ratio of inter-affiliate transactions at 65 percent.
Among the seven companies newly listed for review in 2023, Hybe, the K-pop firm behind global sensation BTS, logged the highest ratio at 33.9 percent. (Yonhap)