The Korea Fair Trade Commission said on the 22nd it will open deliberations into alleged violations of the Fair Trade Act by six SM Group affiliates (SMAMC Investment Loan, Samwhan Corporation, SM Line, SM High Plus, HNE&C, and Samra Midas), including funneling work to companies owned by the owner family. The Korea Fair Trade Commission (FTC) plans to convene the commission (the full committee or a subcommittee) to make a final determination on whether the law was violated and to decide the level of sanctions, including a penalty surcharge.
Earlier, the Korea Fair Trade Commission (FTC) launched an investigation after determining there were suspicions that SM Group affiliates funneled work to companies owned by the owner family and provided funding at interest rates significantly lower than normal rates.
According to the Korea Fair Trade Commission (FTC) investigation so far, SMAMC Investment Loan and Samwhan Corporation handed over the Cheonan Seongjeong-dong apartment development project to HNE&C, the personal company of the second-generation owner. The Korea Fair Trade Commission (FTC) assessed that HNE&C's pre-sale revenue from the apartment development reached 128.3 billion won, with pre-sale profit of 36.5 billion won.
The Korea Fair Trade Commission (FTC) also found that SM Line and SM High Plus lent funds for the development project to HNE&C at interest rates far below normal levels, providing undue benefits to related parties. The Korea Fair Trade Commission (FTC) calculated the support amount at about 18.2 billion won (1.75 billion won to HNE&C and 16.4 billion won to Samra Midas).
The Korea Fair Trade Commission (FTC) viewed these acts as violations of Article 47 of the Fair Trade Act (prohibition on providing undue benefits to related parties). The provision bans so-called "private-interest pursuit (work funneling)" by companies belonging to designated corporate groups (large conglomerate groups) with total assets of 5 trillion won or more that provide undue benefits to special related parties, including the owner family.