Curb chaebol's expansion

Conglomerates should no longer engage in unfair practices


Owner families of large business groups or chaebol that adopted a holding company system are still in charge of an aggregate 170 subsidiaries outside the system. This raises concerns about the continuous headlong expansion of chaebol into diverse business fields which puts small and medium enterprises at risk.

According to a report released Monday by the Fair Trade Commission (FTC), 23 chaebol were found to have adopted the holding company system as of Sept. 30, up from 22 a year ago. These business groups reported that the assets of their holding companies and subsidiaries exceeded 50 percent of the total assets of all firms ― both holding and non-holding companies.

Those groups own 962 companies, 760 of which are under the holding company system. By contrast, 170 affiliates were controlled outside the holding company system. Of them, 81 are subject to FTC regulations aimed at preventing owner families from engaging in unfair profit-making activities. However, 28 affiliates are in a blind spot regarding such regulations.

More worrisome is that 109 companies, 64 percent of the 170 outside the system, are potentially in danger of being abused for the self-interest of chaebol owner families. This is because there could be unfair and undue internal transactions between the holding and non-holding companies.

The FTC, the powerful antitrust agency, also said the percentage of internal transactions in the 23 business groups averaged 15.83 percent as of the end of September, down from 17.16 percent a year ago. However, the figure is much higher than the 9.87 percent average in 36 other conglomerates that have yet to adopt the holding company system.

It is wrong for chaebol owner families to maximize their profits and consolidate their managerial control by taking advantage of affiliates outside the holding company system. Chaebol owners should no longer engage in such an unfair practice. That's why the FTC should strengthen its regulation over conglomerates to prevent their overexpansion and blind pursuit of profits for their owner families.