"Correction Order Issued for Hoban Construction and Samra over 'Broadcasting Company Share Disposal'... Calls for Regulatory Easing"

KCC Approves at 28th Meeting
New Designation of Mutual Investment Restriction Business Groups Requires
Gwangju Broadcasting and Ulsan Broadcasting to Divest Shares
Claims to "Relax the 10 Trillion Asset Threshold"

[Asia Economy Reporter Cha Min-young] Hoban Construction and Samra, which violated the ownership restriction regulations for terrestrial broadcasters, have each received corrective orders from the Korea Communications Commission to dispose of their shares in Gwangju Broadcasting and Ulsan Broadcasting, respectively. However, there are also claims that the asset total standard of 10 trillion KRW for regulation violations is excessively low and that regulations should be eased through revision of the official notice.

KCC Issues Corrective Orders to Two Companies According to Current Regulations

The Korea Communications Commission held its 28th meeting on the 7th and resolved accordingly. The KCC may order the correction of violations within a set period of six months if a company violates the terrestrial ownership restriction regulations.

Hoban Construction and Samra were newly designated as mutual investment restriction business groups (large conglomerates with total assets of 10 trillion KRW or more) by the Fair Trade Commission in early May, thereby violating the Broadcasting Act, which prohibits holding more than 10% of shares in terrestrial broadcasters. Initially, Hoban Construction and its affiliates held 39.59% of Gwangju Broadcasting shares, while Samra held 30.0% of Ulsan Broadcasting shares.

According to Article 8, Paragraph 3 of the current Broadcasting Act, large conglomerates with total assets of 10 trillion KRW or more among mutual investment restriction business groups cannot own more than 10% of the total shares or equity of terrestrial broadcasters. Alternatively, they must resolve their designation status as mutual investment restriction business groups under Article 14 of the Monopoly Regulation and Fair Trade Act.

The KCC ordered Samra, which is seeking a buyer, to correct the violation by disposing of its Ulsan Broadcasting shares by December 31 of this year. Considering that the sale process of Gwangju Broadcasting is underway, the KCC postponed the corrective order for Hoban Construction. Currently, the KCC is processing the approval application for the change of the largest shareholder of the new buyer of Gwangju Broadcasting.

"Need to Update the 10 Trillion KRW Asset Total Regulation Standard"

At this KCC plenary meeting, the criticism that the 10 trillion KRW investment restriction standard is too low was raised once again. A Samra official, attending as a respondent, stated, "There is no disagreement on the cause of disposal, facts, or violations, but considering the national economic development, we hope the 10 trillion KRW standard will be raised," adding, "We seek leniency such as regulatory improvements related to ownership restrictions to enhance competitiveness in the broadcasting sector and postponement of corrective orders."

KCC Standing Commissioner Kim Hyo-jae also pointed out, "Considering current needs and economic scale, how long will the standard remain at 10 trillion KRW?" and "The KCC should raise the issue of whether the 10 trillion KRW limit is appropriate and take measures through official notices, etc."

According to the Fair Trade Commission’s Corporate Group Portal, the number of domestic corporate groups with total assets of 10 trillion KRW or more among general companies was 17 in 2008 but increased to 40 as of May 2020.

Kim Woo-seok, head of the Terrestrial Broadcasting Policy Division, said, "This is a matter of how to ease regulations, but there are also claims that regulations should be strengthened, so we are reviewing it practically," adding, "Even if regulations are eased according to business rankings or the Fair Trade Commission’s official notice methods, there are matters to consider regarding which standards to apply."