SK fined for unfair intra-group deals

Group denies FTC accusation involving SK C&C


The nation’s antitrust watchdog said Sunday that it has fined seven business units in SK Group 34.6 billion won ($30.3 million) for unfairly supporting another IT outsourcing firm, SK C&C, whose largest shareholder is chairman Chey Tae-won.

It is common in Korea for major conglomerates to have their own system integration affiliate be responsible for the management and operation of the computer systems of the entire group.

According to the Fair Trade Commission, however, SK C&C had charged its sister firms “excessively high” prices for labor and maintenance costs, compared to the industry’s ordinary level.

The labor costs, in particular, were about 9 to 72 percent higher than those SK C&C charged when it traded with non-SK companies, the FTC said.

The company was found to have earned more than 1.7 trillion won over the past five years from deals with SK affiliates, of which labor costs made up 975.6 billion won.

“Even though they could have suggested better contract conditions, they accepted the unilateral deals without enough consideration,” said Shin Young-seon, the FTC’s antimonopoly bureau chief.

“As the result, SK’s seven affiliates suffered losses, while SK C&C and its large shareholders, who are also the group’s owner family, gained benefits.”

As of July last year, SK chairman Chey owned a 44.5 percent stake of SK C&C and his younger sister Chey Ki-won owned a 10.5 percent stake.

The FTC said it was the first time the agency imposed fines on a conglomerate for unfair intra-group deals in the system integration sector, in which intra-group deals are made most frequently here.

SK C&C and its company officials were also slapped with another 290 million won in fines for hindering the related investigations launched by regulatory authorities in July last year.

The company was fined 200 million won, the upper limit of the fines imposed on the charge, while other 90 million won was imposed on five employees who attempted to hide or delete company documents.

SK Group, however, immediately denied all allegations, hinting at taking legal actions against the FTC’s investigation result.

“The deals were made based on the government’s recommendations and market level,” said the group in a statement written under the names of seven affiliates.

“SK will explain the characteristics of the software and telecom industries through all-out efforts and ways, including legal measures.”

By Lee Ji-yoon (jylee@heraldcorp.com)