Conglomerates' internal trading dips 8.7% in 2020 on tough rules

Transactions among affiliates of South Korea's major family-controlled conglomerates fell nearly 9 percent in 2020 from a year ago due to tough regulations, data showed Wednesday.

The value of in-house transactions by 2,197 units of 54 business groups came to 158.9 trillion won ($143 billion) last year, down 8.7 percent from a year earlier, according to the data by corporate tracker CEO Score.

Internal transactions accounted for 11.7 percent of their total sales in 2020, down from 12.5 percent a year earlier.

The drop in conglomerates' internal transactions was attributed to strict government regulations on their practice of having subsidiaries award lucrative contracts to each other.

Such trading, which undermines the principle of fair competition, is blamed for allowing owner families to easily earn large profits.

Leading tuna fishing company Dongwon Industries Co. had the largest ratio of internal transactions to sales at 68.4 percent last year, followed by retail giant Aekyung Group with 35.3 percent, Samyang Foods Co. with 33.5 percent and major liquor maker Hite Jinro Co. with 33 percent.

Samyang Foods posted the largest on-year decrease with 34.1 percentage points, while pharmaceutical giant Celltrion Inc.'s ratio of internal trading soared to 14.2 percent in 2020 from 0.3 percent a year earlier.

There have been growing calls here to curb local conglomerates' internal deals and their economic dominance, and to level the playing field for small and midsized enterprises. (Yonhap)