Fair Trade Commission, Designation of Large Business Groups and Change of Identical Person
Coupang Designated as Corporation with Identical Person... "Future Improvement of Identical Person Designation System"
[Sejong=Asia Economy Reporter Kwon Haeyoung] Third-generation business leaders such as Chung Euisun, Chairman of Hyundai Motor Company, and Cho Hyunjoon, Chairman of Hyosung, have been officially recognized by the government as heads of their respective business groups. Coupang has entered the list of large business groups by surpassing 5 trillion won in assets, but instead of Kim Beomseok, the chairman of the board, the corporation itself was designated as the same person.
The Fair Trade Commission announced on the 29th that as of May 2021, 71 business groups with total assets of 5 trillion won or more have been designated as publicly disclosed business groups, and among them, 40 groups with total assets of 10 trillion won or more have been designated as mutual shareholding restricted business groups.
The newly designated publicly disclosed business groups include Coupang, Korea Aerospace Industries, Hyundai Marine & Fire Insurance, Joongang, Bando Holdings, Daebang Construction, MDM, and IS Holdings, while KG was excluded.
Companies belonging to publicly disclosed business groups are subject to disclosure and reporting obligations under the Fair Trade Act and are regulated against private interests of the head family. Companies belonging to mutual shareholding restricted business groups are additionally subject to prohibitions on mutual shareholding, debt guarantees, and restrictions on voting rights of financial and insurance companies. Celltrion, Naver, Nexon, Netmarble, Hoban Construction, SM, and DB were newly designated as mutual shareholding restricted business groups, while Daewoo Construction was excluded.
The Fair Trade Commission changed the heads (same persons) of Hyundai Motor and Hyosung. For Hyundai Motor, Honorary Chairman Chung Mongkoo delegated all voting rights of Hyundai Motor and Hyundai Mobis shares to Chairman Chung Euisun, considering executive changes and large-scale investments after Chairman Chung’s inauguration. Similarly, for Hyosung, Chairman Cho Hyunjoon, as the largest shareholder of the holding company, received comprehensive delegation of voting rights over Hyosung shares held by Honorary Chairman Cho Seokrae, taking into account major management changes after Chairman Cho’s inauguration.
In the case of Coupang, total assets rapidly grew from 3.1 trillion won to 5.8 trillion won, leading to its new designation as a publicly disclosed business group. The corporation itself was designated as the same person for Coupang. Although Chairman Kim Beomseok effectively controls domestic Coupang affiliates through the U.S. Coupang corporation, consideration was given to the fact that Chairman Kim is a U.S. national. The Fair Trade Commission has so far designated corporations as the same person for foreign companies. Vice Chairman Kim Jaesin of the Fair Trade Commission explained, "We comprehensively considered past cases, current institutional shortcomings, and the scope of affiliated companies."
The Fair Trade Commission plans to improve the entire designation system, including the definition and requirements of the same person and the scope of related persons. The Commission explained that current regulations are designed based on domestic premises, and it is difficult to enforce and effectively regulate by immediately judging and regulating foreigners as the same person.
This large business group designation highlighted the rapid growth of business groups focused on the pharmaceutical and IT sectors due to the impact of COVID-19. Celltrion, which focuses on pharmaceuticals, saw its total assets increase significantly from 8.8 trillion won to 14.9 trillion won due to stock value appreciation, company establishment through stock investment, and increases in sales and net income.
The growth trend of business groups focused on the IT sector was also remarkable due to the rapid expansion of the non-face-to-face market. Coupang was newly included in the disclosed groups, and the total assets of Kakao (14.2 trillion won → 19.9 trillion won), Naver (9.5 trillion won → 13.6 trillion won), Nexon (9.5 trillion won → 12 trillion won), and Netmarble (8.3 trillion won → 10.7 trillion won) also increased.
Meanwhile, although the total assets of all business groups increased due to increased market liquidity and soaring asset prices caused by COVID-19, business performance deteriorated. Total assets (2,176.1 trillion won → 2,336.4 trillion won) increased by 160.3 trillion won, while sales (1,401.6 trillion won → 1,344.5 trillion won) and net income (48 trillion won → 43.5 trillion won) decreased by 57.1 trillion won and 4.5 trillion won, respectively.
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