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Hyundai Motors Company
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Support by Hyundai, Kia for related companies cited by antitrust body
The nation’s antitrust watchdog said it would impose huge fines on several major conglomerates for illegally funding affiliated companies. According to the Fair Trade Commission (FTC) on January 21, Hyundai-Kia Automotive Group has unlawfully funded its affiliates, such as Glovis and Amco, at which family members of Hyundai-Kia chairman Chung Mong-koo are major shareholders. Under fair trade laws, large firms offering favorable conditions when doing transactions with their affiliated companies should be punished for unfair practices. The FTC’s investigation into the Hyundai-Kia Automotive Group fueled controversy in October last year after it was revealed that the conglomerate tried to bribe FTC officials in charge of probing suspected illegal transactions between Hyundai-Kia and its affiliates. The free vouchers given to the FTC officials were returned to Hyundai-Kia the next day and the incident was publicized in the media.The FTC said it would complete its case against the Hyundai-Kia group before the end of February. If the FTC concludes that the Hyundai-Kia group illegally supported its affiliated companies, the group is expected to incur substantial fines. Glovis, Hyundai’s logistics unit for which Chairman Chung Mong-koo and his son Eui-sun hold a 60-percent share, has accomplished rapid growth due to its support from other Hyundai affiliates. Kim Seun-ung, executive director of the Center for Good Corporate Governance, said, "It is highly possible that illegal inside transactions of Hyundai Automotive Group will be uncovered by the prosecution’s investigation and reflected in the court’s ruling. The shareholders of its affiliates will likely file a suit against the group." Owing to the court’s strict judgment on legality surrounding affiliate funding, the FTC is trying to secure additional evidence on whether funds were transferred to affiliated companies or not, according to an executive of the FTC. On the day of the announcement surrounding the impending Hyundai-Kia group fines, the FTC slapped Doosan Industrial Development, the construction arm of Doosan Group, with 4.1 billion won (US$4.4 million) in fines for illegally funding its affiliated firms. The company is accused of having paid interest for the money Doosan Vice Chairman Park Jung-won and 27 other executives borrowed from banks between 2000 and 2005 in order to take part in the company’s capital-raising campaign. Doosan Industrial Development also faces allegations that it bought commercial paper worth 6 billion won issued by affiliated firm Neoplux at irregularly low interest rates in 2003. Commercial paper is a form of unsecured, short-term debt issued by a corporation, usually to meet short-term liabilities. Please direct questions or comments to [englishhani@hani.co.kr]
