Choi Jang-gwan, head of the Korea Fair Trade Commission’s Business Group Surveillance Bureau, announces on the 22nd at the Government Complex Sejong the launch of deliberation procedures over allegations that six affiliates of the SM business group provided unfair benefits to related parties. Newsis
SM Group affiliates will face review by the Fair Trade Commission (FTC) over allegations that they handed a promising real estate development opportunity to a company owned by the chairman’s heir and provided low-interest financing. The FTC viewed the case as a “very serious violation” and recommended criminal referrals against both corporate entities and individuals.
The FTC said Monday it had sent an examination report and submitted it to the commission regarding allegations that six affiliates of the SM business group provided improper benefits to related parties in violation of the Fair Trade Act. The companies under review are SMAMC Investment Loan, Samhwan Corporation, SM Line, SM Hi-Plus, HN E&C, and Samra Midas.
The FTC first found that SMAMC Investment Loan and Samhwan Corporation provided the business opportunity to develop an apartment project in Seongjeong-dong, Cheonan, in December 2022 to HN E&C, a private company owned by the chairman’s heir. The investigation found that HN E&C earned 128.3 billion won in sales revenue and 36.5 billion won in profit through the project.
In addition, SM Line and SM Hi-Plus face allegations of providing improper benefits to related parties by lending development project funds to HN E&C at rates lower than normal interest rates. SM Line was also found to have lent low-interest funds to Samra Midas, another company owned by the chairman’s family.
The FTC calculated the scale of support generated in this process at approximately 18.2 billion won. The support related to HN E&C amounted to 1.75 billion won, and the support related to Samra Midas amounted to 16.4 billion won.
The FTC viewed these acts as very serious violations of Article 47 of the Fair Trade Act and recommended corrective orders, the imposition of fines, and criminal referrals of corporate entities and individuals. The fines to be imposed on SM Group could reach a total of around 49.6 billion won, including up to 20.5 billion won for the provision of business opportunities and up to 29.1 billion won for the provision of funds.
However, the examination report is a document containing the examiner’s judgment and is not the final conclusion. The FTC plans to determine the final sanctions and their level through deliberation by the full commission, after going through procedures to ensure the submission of opinions and the right of defense for those under review. “We will continue to strengthen monitoring of improper wealth transfer through methods such as providing business opportunities and financial support in connection with apartment development projects,” an FTC official said.