FTC set to revise definition of ‘chaebol owner’

South Korea’s antitrust watchdog will take steps to revise the current regulatory definition of “conglomerate owner,” seeking to expand the range of the term.

The move came in the wake of public disputes regarding an earlier decision that e-commerce platform Coupang’s founder and chief Kim Bom-suk could not be seen as the controlling shareholder due to his US citizenship.

“(The regulations regarding the definition of controlling shareholder) should be applied to all large business groups, regardless of the nationality (of the person under discussion),” said Joh Sung-wook, chairperson of the Fair Trade Commission in a press briefing held Tuesday at Sejong Government Complex.

“In the future, we shall not exclude the possibility of including foreign nationals from the list of controlling shareholders, should they wield actual control over the business.”

The FTC chief vowed to soon kick off a research service on the issue, in order to refine the definition of the controlling shareholder. The notice of tender for the given research could be posted as early as within the month, she added.

Late last month, the regulator included Coupang on its list of “large business groups,” henceforth imposing heavier corporate disclosure and compliance obligations on the e-commerce operator that had previously remained in the startup arena.

“It is obvious that CEO Kim is in effective control of Coupang here,” said the FTC’s Vice Chairman Kim Jae-shin in a briefing.

“(But) we had to consider past cases, the defects in the incumbent system and the range of affiliates,” he added, explaining the reason for excluding Kim from the list of conglomerate chiefs.

The FTC’s annually updated list of “large business groups” -- those with assets worth 5 trillion won ($4.45 billion) or more that face special corporate disclosure rules and antitrust regulations -- is largely equated with the definition of “conglomerates” or chaebol in Korean.

While viewing the e-commerce champion as a conglomerate, the FTC refrained from officially designating Kim as the “same person” as the business itself, in other words, the controlling shareholder.

The term “same person” under the FTC system refers to the person who holds the controlling power over the business and may thus be deemed to be in an equal position with the group itself.

The FTC will also seek to revise the range of “families and relatives” when defining the same person. Under current rules, the controlling shareholder is obligated to submit the property holding details of his or her “family and relatives,” which refers to spouse, blood relatives within second cousins, and in-laws within cousins.

“Through the research, we will review whether the given regulation accords with the family concept and perception of today,” said Yook Sung-kwon, director of business group policy.

Meanwhile, the FTC’s business group department led by Yook will be realigned as a regular organization.

“According to the Ministry of the Interior and Safety’s notification as of yesterday, three (of the four) sectors of the business group department have been confirmed to be converted into regular organizations,” said Joh.

The remaining one sector, which deals with holding company issues, will be reassessed a year later.

The corresponding department kicked off in 2017 as a two-year pilot project under former FTC chief Kim Sang-jo, who later was appointed as Cheong Wa Dae’s policy chief. The organization’s term was extended for another two years in 2019.

Over the past few years, the organization has exposed several landmark antitrust activities by conglomerates, imposing over 140 billion won in fines against violators last year.

By Bae Hyun-jung (tellme@heraldcorp.com)