Fair Trade Commission Investigates Hanwha for 5 Years, Finds "No Charges" (Comprehensive)

Fair Trade Commission: "Difficult to Confirm Involvement of the Owner Family and Insufficient Proof of Fair Price... Hope This Does Not Send the Wrong Signal"
Hanwha: "Respect the FTC's Judgment"

[Asia Economy Reporters Joo Sang-don (Sejong) & Park So-yeon] The Fair Trade Commission (FTC), which has been investigating Hanwha Group's 'unfair provision of benefits to related parties' for five years, has ultimately concluded with a no-charge decision. The reason cited was the difficulty in confirming whether the owner family was involved or directed the unfair support, and the lack of sufficient proof of fair prices for data services such as circuit usage fees. After focusing on investigating Hanwha's private interest diversion allegations for five years and issuing a no-charge decision, the FTC faces criticism for wasting administrative resources on an excessive investigation.

On the 24th, the FTC stated, "The Commission decided to 'terminate the review process' regarding Hanwha's application management service transactions due to difficulties in verifying facts such as customary trading practices in the relevant market and involvement or direction by the group or related parties," and added, "Regarding data circuit and colocation service transactions, a 'no-charge' decision was made considering the lack of proof of fair prices."

Application services generally refer to business application programs used on a customer's information system, including application operation, improvement, development, operation support, and IT planning support. Data circuit services involve purchasing (wholesale) dedicated circuits or internet circuits from telecommunications operators and reselling (retail) them to users. Colocation services refer to leasing space in data centers to install clients' computer equipment and providing a usage environment that enables stable operation of the equipment.

The FTC investigated Hanwha affiliates from January 1, 2015, to September 30, 2017, on the grounds that they unfairly concentrated work orders to Hanwha S&C (now Hanwha Systems), which was 100% owned by the three sons (Dong-gwan, Dong-won, Dong-seon) of Hanwha Chairman Kim Seung-yeon. Based on the investigation over five years, the FTC sent a review report (equivalent to a prosecutor's indictment) proposing sanctions against Hanwha Group on May 15 this year. The FTC judged that Hanwha affiliates traded application management services with Hanwha S&C on a significant scale (105.5 billion KRW) without reasonable comparison and conferred unfair benefits to related parties through overpayment of data circuit usage fees and colocation fees.

The FTC held a plenary session, which functions as a court, over two days on the 11th and 12th, deliberated on Hanwha Group's unfair benefit provision allegations, and decided on no charges.

Additionally, although the FTC initially believed that Hanwha Systems and its employees deleted and concealed data during two on-site investigations, it decided not to file charges, judging that the acts were not sufficiently serious and clear.

An FTC official said, "We hope this decision is not perceived as a wrong signal that the FTC will not investigate system integration (SI) transactions of group affiliates in the future," and added, "The case regarding unfair support by Hanwha Solutions, which is currently under review, is scheduled to resume deliberations in September."

In response to the FTC's decision, Hanwha stated, "We respect the judgment and decision of the Fair Trade Commission," and added, "Hanwha Group will continue to strive to establish a culture of fair trade and win-win cooperation."

This content was produced with the assistance of AI translation services.