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Biz groups' inter-affiliate trading dips in 2019

All News 12:00 November 12, 2020

SEOUL, Nov. 12 (Yonhap) -- Transactions among affiliates of South Korea's large business groups slightly fell in 2019 from a year earlier on tough regulations, the corporate watchdog said Thursday.

The value of inter-affiliate transactions by 1,955 units of 64 large business groups amounted to 196.7 trillion won (US$176.9 billion) last year, down 1.1 trillion won from 197.8 trillion won a year earlier, according to the Fair Trade Commission (FTC).

But such deals accounted for 12.2 percent of all business contracts clinched by them last year, unchanged from the previous year, it said.

The FTC oversees the business groups' equity investments and inter-affiliate loan guarantees. The number of business groups subject to the watchdog's tough surveillance rose to 64 in 2019 from 59 the previous year.

Biz groups' inter-affiliate trading dips in 2019 - 1

The current law forbids inter-affiliate trading within a business group whose owner and family hold more than 30 percent of the shares in an affiliate.

Internal trading has been 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.

Inter-affiliate transactions by the country's top 10 conglomerates, including Samsung Group and Hyundai Motor, fell to 150.4 trillion won from 150.8 trillion won a year earlier. But the portion of such deals among total business contracts gained 0.3 percentage point on-year to 14.1 percent.

SK Group, the country's energy and telecom giant, clinched the largest deals with its subsidiaries, valued at 41.7 trillion won, followed by Hyundai Motor with 37.3 trillion won and Samsung with 25.9 trillion won.

In terms of the portion of in-house transactions, the country's pharmaceutical giant Celltrion ranked first with 37.3 percent, followed by SK Group with 26 percent and construction business-focused Taeyoung with 21.4 percent.

The FTC said unlisted firms and conglomerates run by owners reported relatively high portions of inter-affiliate trading, with such trading by the top 10 conglomerates, in particular, being on a rising trend over the past five years.


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