Unfair Transactions

 

Hanwha Corp. has been fined for fixing prices and colluding to share the market in the industrial explosives market by the Fair Trade Commission (FTC). The company also has been referred to the prosecutor's office.

On Jan. 30, the FTC imposed a fine of 51.69 billion won (US$47.17 million) on Hanwha and a fine of 12.69 billion won (US$11.58 million) on Koryo Nobel Explosives based on the allegations.

The two companies, the country's only explosives producers, colluded to fix prices starting in 1999. As they monopolized the market, they decided to avoid price competition and maximize their profits.

Since 1999, the two companies allegedly colluded to raise their factory prices equally four times. Also, they agreed about how much of the market each would take, which is 70 percent for Hanwha and 30 percent for Koryo Nobel Explosives. This market share has been maintained for a decade.

Not only that, but the two companies prevented other companies from entering the market. When Sehong Explosives tried to enter the market in 2002, the two companies interrupted the conduct of business of Sehong Explosives, colluding to take actions such as punishing a construction company that did business with the new company. Sehong Explosives went out of business in 2007, and Koryo Nobel Explosives took the company over.

The two companies were extremely careful to not be caught by the FTC. The managers turned off their cell phones when they met for collusion, and used other people's phones or public phones when they need to make phone calls, the FTC said.

Meanwhile, Korea Explosives Inc., the parent company of the Hanwha Group, was established in 1952. The late Kim Jong-hee, founder of the company, died in 1981 at the age of 59, and Kim Seung-youn, his eldest son, was only 29 years old when he succeeded his father. So, the explosives business has been recognized as the symbolic business of the Hanwha Group.

As it is safe to say that the company is the starting point of the explosives industry in Korea, Hanwha has been the leader of the sector. However, Hanwha has led the collusion for more than a decade, abusing its dominant position in the market. After it was revealed by the FTC, Hanwha pleaded for leniency, but the company failed to be exempted from the fine.

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