Investigating Allegations
The Korea Fair Trade Commission (KFTC) will punish OCI Group for unfair internal trading. The OCI Group can face a fine of up to 28 billion won if the allegations are proven true at an upcoming plenary session.
According to industry sources on May 3, the KFTC sent an investigation report to SGC Solutions and SGC Energy in October last year for allegedly engaging in unfair internal trade with affiliates.
SGC Energy, a glass manufacturer, and SGC Solution, an eco-friendly general energy company, both belong to OCI Group under the Fair Trade Act. SGC Solution is a 100 percent subsidiary of SGC Energy, and SGC Energy’s 56.91 percent stake is held by related parties of the owner’s family including Chairman Lee Bok-young (10.30 percent) and his eldest son Lee Woo-sung, vice president of SGC E&T Construction (19.23 percent).
The KFTC’s report says that SGC Energy unfairly gave work to SGC Solution. In 2017, SGC Solution won a contract to supply bituminous coal to SGC Energy. Through this contract, SGC Energy bought 69.1 billion won worth of bituminous coal from SGC Solution.
The KFTC plans to finalize the level of the punishment at a plenary meeting in the second half of this year. The key issue will be whether SGC Energy signed a contract on terms favorable to SGC Solution.
If the process proves that the family of Chairman Lee Bok-young unfairly took private profits, the company may be fined up to 10 percent of its average sales for the previous three business years. Considering that SGC Solution’s annual sales around 2017 amounted to 280 billion won (US$211 million), the fine can reach 28 billion won (US$21 million).
The KFTC had previously included several affiliates of OCI Group in its unfair practice surveillance in late 2020. In addition to SGC Energy and SGC Solution, which are facing the KFTC’s punishment, SGC Development, SGC E&T Construction, and UNID Global Corporation were also found to have a high volume and rate of internal trade. In particular, UNID Global Corporation is a de facto private company, as Chairman Lee Hwa-young (64.29 percent) and his son Lee Woo-il (35.71 percent) hold a 100 percent stake in the company.