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(LEAD) Unfair intra-affiliate transactions rise 23 pct despite regulations

All Headlines 11:18 June 07, 2017

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SEOUL, June 7 (Yonhap) -- Unfair intra-affiliate transactions by business conglomerates rose by 23.1 percent last year, despite the government's efforts to clamp down on such business practices that are considered unfair ways to help such companies, industry data showed Wednesday.

According to the data by corporate tracker CEO Score, the value of unfair in-house transactions by 91 affiliates of conglomerates rose by 1.4 trillion won (US$1.2 billion) from two years ago to 7.9 trillion won last year.

The total value of intra-affiliate transactions by 984 affiliates, however, fell 13.7 percent from two years ago to 133.6 trillion won, the data showed.

A listed affiliate with an owner holding more than 30 percent of the affiliate is banned from doing business transactions with other firms in the same conglomerate. For an unlisted unit, the ownership restriction is 20 percent.

Lotte Group saw its intra-affiliate transactions jump to 572.6 billion won last year, compared with 3.1 billion won in 2014.

Samsung Group and Hyosung Group also saw their intra-affiliate transactions grow 284 percent and 67 percent, respectively.

Hyundai Motor Group's intra-affiliate transactions fell 97.4 percent to 26.8 billion won, according to the data.

The nation's fair trade law forbids unfair support to affiliates inside a business conglomerate that are effectively controlled by chaebol owners' family members.

Such trading is blamed for allowing so-called owner families an easy way to make huge sums of money by winning lucrative contracts with other companies in the group. This is seen as undermining the principle of fair competition.

Kim Sang-jo, the nominee to lead South Korea's antitrust regulator, has recently vowed to intensify financial sanctions, such as increasing fines against illegal intra-group trading.

There have been growing calls in the country to rein in the economic dominance of family-controlled conglomerates and to level the playing field for smaller firms.

Currently, violators of the fair trade law are subject to up to three years in prison or a maximum fine of 200 million won.
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