FTC targets CJ owner family-related business

JS Communications, fully-owned by Lee Jae-hwan, the chairman of CJ Group’s younger brother, is being investigated by the Fair Trade Commission over deals with its sister firm CJ CGV, according to industry sources Monday.

JS Communications, the screen advertising arm of the nation’s food and entertainment giant, has offered services to CJ CGV, the nation’s largest multiplex cinema chain, since its foundation in 2005.

“We can only confirm that officials from the Fair Trade Commission conducted an on-site inspection of the two affiliates last week,” a CJ Group official said.

FTC officials refused to comment on the CJ case, mentioning compliance issues.

Industry sources said as the next step following the inspection, the FTC will look into whether JS Communications took advantage of its CEO’s family relations in trade with CJ CGV.

The advertising agency has heavily depended on CJ CGV for business since it foundation.

The total value of its business with CJ CGV reportedly reached up to 56 billion won ($47 million) in the first nine months of 2015. The net profit of the company was estimated to around 10 billion won last year.

If the FTC finds “unfair” inside trading charges, it will decide whether to levy fines or not.

The FTC probe over the firm led by CJ Group chairman’s sibling is forecast to escalate uncertainties in the management on the group level.

Ailing CJ Group chief Lee Jay-hyun has been in legal disputes for years. He has been preparing for an appeal to the Supreme Court since he was sentenced to 2 1/2 years in prison by the Seoul High Court last December over his embezzlement, breach of fiduciary duty and tax evasion charges.

Market watchers said it could take time for the FTC to levy penalties on CJ, but they expect the antitrust body to widen its monitoring over unfair business practices conducted by affiliates of conglomerates as the public pressure for “economic democratization,” seeking fair competition in the market, is mounting amid deepening polarization.

Besides CJ, conglomerates such as Hanjin, Hanwha, Hite Jinro and Hyundai are reportedly under investigation by theFTC over their allegedly unfair internal trading practices.

By Seo Jee-yeon(jyseo@heraldcorp.com)