HiteJinro Hid Five Affiliates of the Family Conglomerate for 9 Years
Intentional Omission in Question... Fair Trade Commission Considers Prosecutor Referral
[Asia Economy Reporter Lee Seon-ae] Hite Jinro has stated that the investigation by the Fair Trade Commission (FTC) into allegations that it failed to report subsidiaries owned by relatives of Chairman Park Moon-duk for nine years is a "simple mistake."
On the 20th, a Hite Jinro official said, "Since this is an ongoing investigation, it is difficult to confirm specific details, but we are cooperating sincerely with the investigation." He added, "However, these companies are independently managed and do not have any shares owned by the same person or their direct ascendants or descendants, so the failure to report was not intentional," emphasizing that there was no intent and it was a simple error.
The FTC recently conducted an on-site investigation of Hite Jinro for violating the reporting and data submission obligations related to publicly disclosed business groups (quasi-chaebols). Hite Jinro, a publicly disclosed business group with assets exceeding 5 trillion won, is required to report annually to the FTC the companies owned by the same person (head of the group), Chairman Park, and his special relations (relatives within six degrees of kinship and within four degrees of affinity).
Although Hite Jinro was designated as a publicly disclosed business group in 2010, it only reported five additional companies last year: Songjeong, Yeonam, Daewoo Combine, Daewoo Package, and Daewoo Chemical. These companies are either 100% owned or majorly owned by Chairman Park Moon-duk’s nephews and cousins. They manufacture PET bottles, labels for bottles, and packaging materials, and have significant internal transactions with Hite Jinro, raising suspicions of preferential treatment through internal dealings.
The FTC is investigating on the grounds that Hite Jinro deliberately failed to report these companies for nine years. Considering that up to 93% of the sales of these five companies are internal transactions, it is difficult to view the omission as accidental. Based on the investigation of transaction details and other evidence, the FTC is also considering referring Chairman Park to the prosecution.
Meanwhile, it is expected that the image of Hite Jinro’s soju and beer brands will inevitably suffer damage. There are concerns that the growth of the beer brand "Terra," which is rapidly increasing its market share in the domestic beer market, and the soju brand "Jinro Is Back" may be hindered.
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