Inter-affiliate trading grows among conglomerates

Transactions among affiliates of large business groups in South Korea have increased over the past year with one in five firms making over 70 percent of their sales with sister firms, a report showed Tuesday.

According to the report by Chaebol.com, which tracks the country’s conglomerates, 211 or 18.1 percent of 1,165 firms affiliated with the country’s top 30 business groups had over 70 percent of their sales with their sister companies last year.

The figure is up from 190 and 11.1 percent a year earlier, according to the report.

The country’s family-owned conglomerates, or chaebol, have been under fire for their so-called inter-affiliate trading. The government is stepping up its surveillance of large conglomerates on suspicions that they have been granting unfair favors to affiliates in bidding and other business transactions.

These practices are feared to be stifling competition and the growth of other small and medium-sized companies.

The report showed that Samsung Group and Hyundai Automotive Group had 21 affiliates each which made more than 70 percent of their sales through intra-affiliate transactions last year.

GS Group came in third with 20 affiliates, followed by SK Group, CJ Group and LG Group.

Meanwhile, the conglomerates’ intra-group trading came to 162.3 trillion won ($146 billion) in 2011, up 34.2 trillion won or 26.7 percent from a year earlier. (Yonhap News)