South Korea's antitrust watchdog might consider expanding its law aimed at punishing intra-group transactions of large local conglomerates to include deals taking place with their overseas affiliates, a source said Thursday.
Intra-group deals are criticized for sidelining smaller companies in bidding processes and also cited as a secret measure employed by owners of conglomerates to transfer their wealth to their family without paying due taxes by awarding them business contracts with favorable terms.
Starting this year, the government has been imposing taxes on intra-group transactions, with the Fair Trade Commission (FTC) taking the lead in toughing regulations on such deals as part of efforts to establish fairer competition rules.
Transactions among overseas affiliates of conglomerates are not subject to the taxation law.
"We plan to gather opinions and views from stakeholders to determine whether transactions taking place among foreign affiliates of business groups fall into the category of intra-group deals," an FTC official said on customary condition of anonymity.
His remarks came after Rep. Park Min-shik of the ruling Saenuri Party raised the need to apply the law even to foreign affiliates during a parliamentary audit session into the FTC in mid-October.
Hyundai Glovis Co., a shipping unit of Hyundai Motor Group, could be one of many companies subject to the toughened law.
Intra-group deals among its local affiliates accounted for 35 percent of its total sales last year, but if deals taking place among its offshore affiliates are included, the ratio could jump to 81.9 percent, industry data showed.
The FTC still remains cautious in toughening its stance on intra-group transactions among offshore affiliates, saying that its enforcement would not be as easy as it seems.
"It would be difficult to conduct probes into overseas entities suspected of receiving such deals with favorable terms. And when we actually push for punishment, we also need to take a careful approach as it could lead to additional regulatory steps by local antitrust and tax authorities," another FTC official said. (Yonhap News)
