Sanctions on Conglomerates
From now on, any subsidiary belonging to a major business group with total assets of at least 5 trillion won (US$4.9 billion) and providing unfair profits of 20 billion won (US$19.5 million) or more to the owner’s family will be subject to prosecution. The measure is to hold not only corporate owners and their family members responsible, but also employees engaged in such illegal acts, so the former’s excessive pursuit of private interests can be blocked.
On August 20, the Fair Trade Commission announced the revision along with other amended directives for the prosecution of the violation of the Monopoly Regulation and Fair Trade Act. The new rules will be implemented from August 22. The commission, in fact, had already included some rules of punishment against such pursuits of private interests in the Fair Trade Act revised in February this year. The announcement at this time is to further specify the details.
According to the revision, any conglomerate subsidiary that provides an unfair profit for the owner’s family or a firm it directly owns to record a certain or higher law violation point has to face prosecution. The law violation point is calculated based on the degree of illegality, monetary amount of violation, shareholding ratio of the owner’s family, and other factors. Approximately 208 conglomerates are expected to be covered by the new calculation method.
“The new and more clarified rule will allow the accusation to be even more rational and objective,” the commission explained, adding, “At the same time, the government’s deterrent against conglomerates’ relentless profit-seeking activities will be strengthened.”
The business community is opposed to it though, claiming that it constitutes over-regulation. “Korea is the only country where the fair trade law is applied in punishing corporate heads involved in illegal acquisition of private interests,” it explained. Concerns are rising over the possibility of less investment by conglomerates, too. “Determination of illegality by the Fair Trade Commission as a quasi-law enforcement organization seems sure to be over-regulation,” added law professor Jun Sam-hyun at Soongsil University.