Korea’s trade watchdog said on Monday that conglomerates should publicly disclose major contracts they award to their affiliates, starting from April.
The Fair Trade Commission said any contract with a value that exceeds 5 billion won ($4.4 million) should be approved by a board of directors in advance and the details should be filed with the Korea Exchange in the form of a public disclosure.
The strengthened regulation targets conglomerates that tend to maintain an interlocking structure of sprawling affiliates, which help each other through direct and indirect support such as group-wide contracts.
The move came after the watchdog conducted a survey of chaebol groups and found out that 71 percent of revenues were generated through deals among affiliates, excluding outside bidders.
The revision to the public disclosure rule is intended to block conglomerates from steering deals to their own affiliates so that small and medium-sized enterprises would be given more business opportunities, according to the FTC.
By Yang Sung-jin (
insight@heraldcorp.com)
