This article was published on March 4, 2025, at 5 p.m. on the ChosunBiz RM Report site.
The Fair Trade Commission is preparing to strengthen sanctions against unfair support actions related to 'business opportunity provision.' It plans to raise penalty surcharges and actively enforce the law by referring to similar precedents in the Commercial Code.
Since the legal amendment in 2014, the Fair Trade Commission began regulating 'business opportunity provision' as one type of unfair benefit provision to related parties. Over the 11 years since its introduction, only three cases have been sanctioned under this regulation: Daelim Construction (now DL E&C), SK Siltron, and Hoban Construction.
The Fair Trade Commission is currently examining this issue closely within both its case and policy organizations, the two pillars of the department. With a strong crackdown looming, attention from the targeted large business groups is expected.
According to the Fair Trade Commission on the 5th, it has completed studies on 'improving the penalty surcharge system related to the estimation of violation amounts for unfair support and self-interest appropriating actions' and 'the scope and legal application for business opportunity provision,' and is reviewing how to utilize the results internally.
◇ Completion of the 'business opportunity provision' research commissioned separately by policy and case divisions
The two studies were commissioned separately by the departments related to 'policy' and 'cases.' They share the common point related to the regulation of unfair support acts stemming from 'business opportunity provision.'
According to the Fair Trade Act, domestic companies that belong to publicly disclosed corporate groups must not provide unfair benefits to related parties. One of the prohibited acts is to provide 'business opportunities that would significantly benefit the company if executed directly by the company or through companies it controls.' This means that even if the opportunity clearly benefits the company, it must not be unjustly given to related parties.
The policy-related department is currently reviewing raising penalty surcharges and diversifying calculation methods based on the research results. According to current law, penalties should be imposed equivalent to the amount of unfair support, but if that is difficult to determine, the penalty surcharge can be set at 10% of the transaction size or related sales. If even determining the transaction size is difficult, a fixed penalty surcharge of up to 4 billion won can be imposed, which has also faced criticism for being disproportionately low compared to unfair benefits.
The case-related department plans to reference these research results in uncovering new cases. A Fair Trade Commission official noted, 'There have only been three past rulings on unfair support acts due to business opportunity provision, which has led to confusion among employees on whether similar cases can be viewed as 'business opportunities.'' The official added, 'By referencing similar provisions in the Commercial Code and laws regarding inheritance and gift tax, as well as commercial laws in other countries, the commission intends to regulate problematic cases under the Fair Trade Act as well,' indicating that the application possibilities of laws and the intensity of sanctions will be strengthened to enhance the effectiveness of future penalties.
◇ Three cases of rulings: Daelim, SK, and Hoban… two cases are still in litigation in higher courts
Since the ban on business opportunity provision was enacted in 2014, the Fair Trade Commission has sanctioned only three events for challenging the relevant clause: ▲Daelim Construction (9th September 2019, Fair Trade Commission decision, 1.3 billion won penalty surcharge) ▲SK Siltron (16th March 2022, 160 million won) ▲Hoban Construction (22nd August 2023, 608 million won).
Of these cases, two are ongoing in legal disputes. Daelim Construction accepted the sanctions and concluded the case early. However, the SK Siltron case has been pending at the Supreme Court for a year after the High Court ruled in favor of SK against the Fair Trade Commission. The Hoban Construction case is currently undergoing vigorous discussions in the High Court, and it is difficult to gauge when it will conclude.
Summarizing the three individual cases, Daelim Construction developed its own brand 'GLAD' for hotel business expansion and registered the brand trademark through another hotel brand management company 'AplusD' established by the second and third generations of the founder. The group of hotels attached to the GLAD brand was operated by Daelim Construction's subsidiary 'Ora Tourism,' which had to pay brand usage fees to AplusD due to this structure. Ora Tourism passed on a role that it could have performed as a brand company without charge.
Hoban Construction was performing civil, electrical, firefighting, and landscaping works at various construction sites, but it was determined that the transfer of these without valid reasons to Hoban Construction Housing and Hoban Industry, owned by Chairman Kim Sang-yeol's son and stepson, was problematic. Since Hoban Construction had already signed contracts for the ongoing projects, it could have benefitted the company significantly if they had not terminated the projects mid-way, but the Fair Trade Commission judged that the company had unjustly handed over this opportunity to related parties.
In the legal field, it is evaluated that in the cases of Daelim Construction and Hoban Construction, the companies provided their newly developed businesses or existing projects (closeness) and thus established 'unfair benefit provision' fairly clearly. This is because the enforcement decree of the Fair Trade Act specifically states that if the provider of a business opportunity has a closeness to the recipient, these actions can be problematic.
However, the SK Siltron case has raised sharper disputes compared to the previous two cases, leading to ongoing controversy. This case arose when SK acquired 51% of the equity in the former LG Siltron, a semiconductor wafer production company, and only purchased an additional 19.6% of the remaining 49% equity, while the rest, 29.4%, was purchased by Chairman Chey Tae-won. The Fair Trade Commission judged that if SK had acquired all remaining equity, it would have been a substantial beneficial business opportunity in the future, and determining that the decision to forgo participation in a competitive bid effectively provided the business opportunity to Chairman Chey, they imposed sanctions.
However, the High Court overturned all corrective orders and penalty surcharge imposed by the Fair Trade Commission in favor of SK. The Fair Trade Commission subsequently appealed to the Supreme Court. The point of contention that the Fair Trade Commission is focusing on in future litigation at the Supreme Court is whether 'forgoing something you can do (by participating in the bid to acquire remaining equity) is also seen as providing a business opportunity to the related party (Chey Tae-won).' Until now, the issue was only concerning direct provision of business opportunities, but it seems the Supreme Court ruling will clarify whether passing opportunities to individuals by forgoing them is also a 'passive act' of providing business opportunities.