Internal Transactions in Large Corporations Total 218 Trillion Won... High Proportion in Logistics and IT

Internal Transactions Among Large Corporations Surpass 200 Trillion Won... Increase of 34.5 Trillion Won from Previous Year
Share of Internal Transactions in Top 10 Groups Declines... 13.1% to 12.9%
Fair Trade Commission: "Continuous Monitoring Needed... Efforts Required to Foster a Win-Win Ecosystem"

Fair Trade Commission Releases 2022 Internal Transaction Status of Publicly Disclosed Business Groups
(Sejong=Yonhap News) Reporter Kim Juhyung = On the morning of the 1st, Min Hyeyoung, Director of the Business Group Policy Division at the Fair Trade Commission, held a briefing at the Government Sejong Complex in Sejong City regarding the disclosure of the 2022 internal transaction status of publicly disclosed business groups and trademark transactions. 2022.12.1
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[Asia Economy Sejong=Reporter Lee Jun-hyung] Last year, the internal transaction amount between affiliates of large business groups surpassed 200 trillion won. In particular, the proportion of internal transactions in the logistics and information technology (IT) service sectors was higher than in other industries.

According to the Fair Trade Commission on the 2nd, the internal transaction amount of 76 large business group affiliates designated in May this year reached 218 trillion won last year, an increase of 34.5 trillion won compared to the previous year (183.5 trillion won). The proportion of internal transactions to sales was 11.6%, up 0.2 percentage points from 11.4% the previous year.

The internal transaction amount of the top 10 business groups with heads such as Samsung, SK, and Hyundai Motor Company was recorded at 155.9 trillion won. The proportion of internal transactions to sales for the top 10 groups was 12.9%, down 0.2 percentage points over the past year. The internal transaction ratio of the top 10 groups has been declining for two consecutive years.

The proportion of internal transactions within large business groups tended to increase as the shareholding ratio of the head's family or the second generation of the head increased. For affiliates where the second generation's shareholding ratio was 20% or more, the internal transaction ratio last year was 19.3%, and it rose to 20.5% when the shareholding ratio was 30% or more. However, even in companies with a high shareholding ratio of the second generation, the internal transaction ratio decreased compared to the previous year.

The proportion of internal transactions according to the shareholding ratio of the head of the family or the second generation of the head.
[Photo by Korea Fair Trade Commission]

The industries with a high proportion of internal transactions were the logistics and IT service sectors. Among 31 business groups that disclosed sales status in the logistics sector, internal sales amounted to 12.3 trillion won, with an internal sales ratio of 49.6%. In the case of Coupang, the internal sales ratio reached 100%. The internal sales ratio in the IT service sector (13.1 trillion won) was 68.3%, higher than that of the logistics sector.

The internal transaction ratio of companies subject to regulations related to unfair profit provision to special related parties was 9.7%, down 2.4 percentage points from the previous year. However, the internal transaction amount increased significantly from 8.9 trillion won in 2020 to 30.8 trillion won last year. The increase in internal transaction amount is largely due to the implementation of the revised Fair Trade Act at the end of last year, which increased the number of regulated companies by 570.

The Fair Trade Commission emphasized the need for monitoring internal transactions within large business groups. A Fair Trade Commission official stated, "It is difficult to conclude that there is a high possibility of unfair internal transactions simply because the level of internal transactions is high," but added, "Considering that internal transactions occur frequently in unlisted companies where monitoring by shareholders and other stakeholders is difficult, the need for continuous monitoring of the occurrence of unfair internal transactions is high."

The Fair Trade Commission also expressed concerns about the logistics and IT service sectors, which have a high dependence on internal transactions. The commission said, "Sales companies in logistics and IT services rely on sales to affiliates, which lowers their own innovation momentum, and purchasing companies also depend on affiliate purchases, potentially restricting growth opportunities for independent logistics and IT service companies," adding, "Large business groups are required to take an active stance in sharing internal know-how externally and fostering a win-win ecosystem across the industry."