South Korean antitrust authorities on Thursday, June 24, imposed the largest fine registered to date in the country for unfair internal trading on five Samsung Group affiliates.
The Korea Fair Trade Commission (KFTC) alleges that Samsung Electronics, Samsung Display, and two other units in the group unfairly supported Samsung Welstory since 2013 by allowing it to run its internal cafeteria services for them, local news agency Yonhap reported.
Founded that same year, Samsung Welstory is a wholly-owned affiliate of Samsung C&T, the group’s holding company, and of which Lee Jae-yong, the leader of the conglomerate, is the majority shareholder.
According to KFTC investigations, the four affiliates helped Samsung Welstory continue to maintain its high profitability by supporting labor and other costs.
Antitrust authorities consider that Samsung Welstory has served as a “cash cow” for the founding family of the group, as large amounts of net profits were provided to Samsung C&T as dividends.
Still, the Commission stated it had found no evidence to show that the family that owned the conglomerate, including Lee, were involved in the case.
These kinds of practices are seen as what allows “chaebol” (the giant South Korean family conglomerates) to make significant profits by having subsidiaries award lucrative contracts to each other, undermining the principle of fair competition.
Together, the five affiliates will be given the highest antitrust fine in South Korean history, while Samsung Electronics’ fine alone, 101.2 billion won (US$89.6 million), is the highest for a single company.
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