Fair Trade Commission Imposed Fine on Hoban in 2018
Court Cancels Fine for Two Cases Including Public Land Resale
A court ruling has ordered the cancellation of part of the 60.8 billion won fine imposed by the Fair Trade Commission (FTC) on Hoban Construction for awarding contracts to the son’s company through 'swarm bidding.'
On the 27th, the Seoul High Court Administrative Division 7 (Presiding Judges Gu Hoe-geun, Kim Kyung-ae, Choi Da-eun) partially ruled in favor of Hoban Construction in its lawsuit against the FTC seeking cancellation of corrective orders and fine payment orders. In June 2023, the FTC imposed a fine of 60.8 billion won on Hoban Construction for violating the Monopoly Regulation and Fair Trade Act. According to the FTC, Hoban Construction unfairly supported Hoban Construction Housing, owned by Chairman Kim Sang-yeol’s eldest son Kim Dae-han, and its subsidiaries, as well as Hoban Industry, owned by the second son Kim Min-seong, and its subsidiaries. This fine ranks as the third largest ever imposed by the FTC, following Samsung Welstory’s 234.9 billion won and SPC’s 64.7 billion won fines.
The court ordered the cancellation of fines related to two of the four violations pointed out by the FTC: the resale of public land and the free lending of bid application deposits. However, it upheld the fine regarding the free provision of payment guarantees amounting to 2.6393 trillion won for 40 public land project financing (PF) loans conducted by the son’s companies, as well as the transfer of construction work worth 93.6 billion won.
From 2013 to 2015, Hoban Construction established multiple affiliates and mobilized non-affiliated partners to participate in bids through so-called 'swarm bidding' to increase the chances of winning public land. During this process, Hoban Construction lent bid application deposits free of charge 414 times to the son’s companies. Hoban Construction paid the bid application deposits necessary for participation. Additionally, it was found that Hoban Construction transferred 23 public land sites it won in bids on a large scale to the second-generation companies.
According to the FTC’s investigation, through these processes, the son’s companies were able to achieve sales revenue of 5.8575 trillion won and sales profit of 1.3587 trillion won from 23 public land development projects including Uijeongbu Minrak and Gimpo Hangang. With such large-scale profits, Hoban Construction Housing, owned by the eldest son, surpassed the scale of Hoban Construction itself. Subsequently, on December 4, 2018, Hoban Construction Housing merged into Hoban Construction, with a merger ratio evaluated at 1 to 5.89, enabling eldest son Kim Dae-heon to secure 54.7% of Hoban Construction’s shares.
The FTC did not indict Chairman Kim Sang-yeol as the five-year statute of limitations had passed. At the time, the FTC explained, "This is a case where unfair internal transactions were sanctioned for providing excessive economic benefits throughout the entire business process after enabling a special-related company owned by the second generation, who is the same person at the corporate group level, to acquire a large amount of public land."
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