Eye of The Argus

Several companies are suspected to be forced by Choi Soon-sil and her people to unfairly provide work to some companies in which they are involved. When some companies are involved in unfair trade, the Fair Trade Commission (FTC) accuses them of the unfair action. This past September, the FTC levied a large fine of 7.17 billion won on CJ CGV, CJ Group’s multiplex theater chain, for unfair transactions with an advertising agency which is a hundred percent owned by the younger brother of the head of CJ, Lee Jay-hyun.

Likewise, the FTC has been accusing companies which are suspected of unfair trading with their subsidiary companies over the amount regulations allow. The regulations were introduced in 2013 to combat unfair trade and transactions within large companies.
However, large companies have been evading the rules by lowering down the monetary amount of transactions within the companies to the amount that the regulations allow. The amount of taxes large companies paid because of insider transactions has been getting smaller since 2014 with taxes amounting to 80.1 billion won paid in 2013, 102.5 billion won in 2014, 50.1 billion won in 2015 and 49.9 billion won in 2016, respectively.

Plus, the total amount of insider trade by individual subsidary company of large companies in 2016 which the taxes are incurred increased by 22 percent from 2015, totaling 49.7 million won in 2015 and 60.5 million won in 2016.

Incidentally, although the unfair trade inside large companies is a serious problem, some say that this issue within mid-sized companies is also serious. Last year, CEO Score looked into the stock trades of the top 100 companies in South Korea, and it turned out that the ratio of illegal insider trading of 51 mid-size companies was 14.8 percent, which is higher than that of large companies by 1.4 percent point.

The reason why mid-sized companies do not receive punishment from the FTC is because, in the past, the regulation was needed to be eased for mid-sized and small sized businesses because the intent of the regulation was to prevent large companies from unfair trade inside a company and to keep the presidents’ families of large family firms from irregularly transferring their wealth.

As a result, the regulation was revised to ease some of the burden carried by midsized and small sized businesses, and their taxes were reduced as well.

There are so many companies with various size that are giving property to the president’s family in irregular ways. One of the ways they do this is to found a subsidiary company and trade with it. To regulate this irregular way of increasing fortune and unfair trade, the FTC exists. However, present regulations only target large companies so such efforts are ineffective with regards to regulating midsize companies. To prevent all companies from evading these regulations, the range of the regulations needs to be expanded to include small and mid-sized companies.


Editorial Consultant

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