A court has ruled that the Korea Fair Trade Commission must cancel the 20.56 billion won penalty surcharge imposed on Daebang Construction.
The Administrative Division 3 of the Seoul High Court (Presiding Judge Yoon Kang-yeol) on the 22nd ruled in favor of the plaintiff in a lawsuit filed by Daebang Construction seeking to cancel the corrective order and the order to pay a penalty surcharge against the Korea Fair Trade Commission (FTC).
In Feb. last year, the Korea Fair Trade Commission (FTC) imposed a 20.56 billion won penalty surcharge on Daebang Construction, finding that the company resold public housing sites expected to generate development gains to affiliates run by relatives of the group owner, thereby providing excessive economic benefits. Daebang Construction objected and filed an administrative suit in Apr. the same year.
According to the Korea Fair Trade Commission (FTC), from Nov. 2014 to Mar. 2020, for about five years, Daebang Construction resold six public housing sites to affiliates including Daebang Industrial Development, which is operated by the son-in-law of group owner Chair Gu Gyo-un, and the size of the public housing sites subject to resale was found to be worth 206.9 billion won. The resold public housing sites were located in new towns in Seoul and the greater capital area and in innovation cities, and the FTC determined that the company provided benefits by transferring sites with many favorable development factors to affiliates.
Daebang Industrial Development developed the sites and posted 1.6 trillion won in sales and 250.1 billion won in operating profit, and its construction capability evaluation ranking rose from 228th in 2014 to 77th in 2024, according to the FTC.
The court found it difficult to view the resale in this case as providing "excessive economic benefits." On the premise that under the Housing Site Development Promotion Act and related regulations, it is not permitted to transact public housing sites at prices exceeding the supply price, the court held that it is difficult to immediately evaluate Daebang Construction's act of reselling public housing sites within the scope permitted by law as providing unjust benefits.
The court also cited, regarding whether to apply former Article 23-2 of the Fair Trade Act containing the provision "prohibition on providing unjust benefits to specially related persons," that the provision applies to companies that fall under business groups subject to disclosure. As Daebang Construction was designated a business group subject to disclosure in May 2020, the court determined that at the time of the resale acts from Nov. 2014 to Mar. 2020, it did not fall under such a business group.
The court concluded that even if profits occurred through sales and construction on the six sites after the resales, those correspond to ex post profits formed over the long development process and are difficult to evaluate as economic benefits provided through the resales.
Meanwhile, in connection with this case, Daebang Construction as a corporation, Chair Gu Gyo-un, and CEO Gu Chan-woo, a father and son, who were indicted in Mar. 2025 on charges of violating the Fair Trade Act, are on trial at the Seoul Central District Court.