The Fair Trade Commission imposed a corrective order and a penalty surcharge on Hanwha Impact, a general holding company, for holding shares in financial firms, which is deemed a violation of the law.
According to the Fair Trade Commission on the 26th, Hanwha Impact owned approximately 6,672,000 shares (39.92% equity) of Mangoosteen No. 1, a private equity limited partnership, for about 13 months from June 2023 to July of last year. The Fair Trade Commission judged this as a violation of the holding company restrictions under the Fair Trade Act and imposed a penalty surcharge of 166 million won.
Article 18, Paragraph 2, Item 5 of the Fair Trade Act states that general holding companies are prohibited from owning shares in domestic companies engaged in the finance and insurance sectors. This is due to concerns that the concentration of economic power occurs when industrial capital dominates financial capital, allowing certain groups to expand their influence over the entire market. The judgment is that if industrial capital, such as manufacturing or energy, owns financial capital like banks and insurance, it can control funding sources, which could disrupt fair competition.
However, there are exceptions. A legal amendment at the end of 2020 allowed general holding companies to hold shares in venture investment companies or new technology financing companies in the form of corporate venture capital (CVC). This allows investments in venture companies and new industries to be encouraged, while ownership of traditional financial firms like banks and insurers remains prohibited.
Mangoosteen No. 1, held by Hanwha Impact, falls under the financial industry as a private equity limited partnership. The Fair Trade Commission believes this is a clear violation of the holding company limit regulations since the equity is close to 40%.
A Fair Trade Commission official noted, "The holding company system is a device to ensure simple and transparent ownership structures and healthy governance," adding that "this action is significant in that it identifies and corrects acts that undermine the purpose of the system."
In response, a Hanwha official said, "The Fair Trade Commission's judgment is based on interpreting the investment in the company-type private equity fund as a violation of the principle of separation of finance and industry," adding, "We addressed the issue immediately, cooperated with the investigation, and strengthened internal control procedures."