On the 11th, the Fair Trade Commission Announces Status of Internal Transactions in Publicly Disclosed Corporate Groups
The amount of internal transactions within large corporations reached 752.5 trillion KRW. In particular, the proportion of internal transactions between domestic affiliates with a family ownership stake of 20% or more significantly increased compared to last year. For the first time this year, the amount of internal transactions with overseas affiliates was analyzed, revealing 477 trillion KRW, which is about 200 trillion KRW larger than the scale of internal transactions between domestic affiliates. Among companies with a controlling family, SK showed the largest increase in both the proportion and amount of internal transactions.
According to the "2023 Disclosure Target Business Groups' 2022 Goods and Services Transaction Status (Internal Transaction Status)" announced by the Korea Fair Trade Commission (KFTC) on the 11th, the proportion of internal transactions among 2,503 affiliates belonging to 82 disclosure target business groups was 33.4%, with the amount of internal transactions reaching 752.5 trillion KRW. The proportion of internal transactions between domestic affiliates was 12.2%, up 0.6 percentage points from the previous year, and the amount of internal transactions increased by 57.1 trillion KRW from last year to 275.1 trillion KRW.
The amount of internal transactions with overseas affiliates, analyzed for the first time this year, was 477 trillion KRW, which is 202.2 trillion KRW larger than transactions between domestic affiliates. The KFTC attributed this to large-scale loans occurring between overseas sales subsidiaries (overseas affiliates) established for overseas customers. A KFTC official explained, "Usually, factories are located domestically, and overseas subsidiaries are created for overseas sales, so sales to overseas sales subsidiaries were recorded at a large scale," adding, "The groups with a high proportion of internal transactions with overseas affiliates were Hankook Tire and Samsung, and the groups with large amounts were SK and Hyundai Motor."
The amount of internal transactions among the top 10 business groups with controlling families was 196.4 trillion KRW, an increase of 40.5 trillion KRW from the previous year (155.9 trillion KRW), marking the largest increase in the past five years. This accounts for 71.4% of the internal transaction amount of disclosure target business groups (275.1 trillion KRW). In particular, the proportion of internal transactions between domestic affiliates of companies with a family ownership stake of 20% or more sharply increased from 8.6% last year to 11.7%.
The business groups with the largest year-on-year increase in the proportion of internal transactions were SK (4.6 percentage points), Hanwha (0.6 percentage points), and Hyundai Motor (0.6 percentage points), in that order. In terms of amount, SK increased by 21 trillion KRW and Hyundai Motor by 10 trillion KRW. A KFTC official explained, "In the case of SK, due to the significant rise in oil prices last year, sales generated by SK Energy Co., Ltd. through affiliates greatly increased," and "For Hyundai Motor, the increase is attributed to the strong global finished car sales market last year, which significantly boosted sales of parts-related affiliates involved in exported finished cars."
The KFTC stated that it will strengthen monitoring for unfair internal transactions. The KFTC explained, "It is difficult to conclude that the risk of unfair internal transactions is high solely because the proportion and amount of internal transactions between affiliates are large. However, considering the continued positive correlation between family ownership stake and the proportion of internal transactions, as well as the large proportion of negotiated contracts related to internal transactions, these factors must be taken into account."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
