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Top court cancels penalty on SK Group over intra-group deals

All News 17:59 March 10, 2016

SEOUL, March 10 (Yonhap) -- The Supreme Court on Thursday ordered the country's antitrust watchdog to cancel some 34.7 billion won (US$28.8 million) in fines it slapped on SK Group, South Korea's third largest conglomerate, over intra-group deals.

In 2012, the Fair Trade Commission (FTC) took punitive action against seven affiliates of the group, including its telecommunications and construction arms, saying they overpaid SK C&C Co., an IT service provider, in an in-house transaction.

Intra-group business deals refer to transactions taking place among affiliates of the same business group.

They have been blamed for sidelining many small and medium enterprises in the bidding process. Some raise suspicions that such arrangements are designed to transfer wealth among family members without paying due taxes. This can be done by awarding contracts with favorable terms to companies run by sons or daughters of the conglomerate's owner to make it look like an ordinary business deal.

The court, ruling in favor of the plaintiffs, said the personnel expenses paid to the IT arm cannot be deemed abnormally high compared to what was paid to other companies for the same service. It added any differences can be attributed to the difference in service provided by the SK affiliate.

SK C&C Co. merged with SK Holdings Ltd., the group's holding firm, last year, paving the way for the group to streamline its governance structure and solidify the group owner's control over the business.


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