[2020 National Audit] Fair Trade Commission to Disclose Analysis Results of Executive Concurrent Positions in Affiliates Held by Family Members of Group Heads

Fair Trade Commission Reports Key Business Status at Political Affairs Committee Audit

Information Disclosure Expansion on 'Internal Transactions and Governance Status of Large Business Groups' as Early as November
Promotion of Establishing Review Guidelines for 'Online Shopping Operators and Platform Markets'

Jong-wook Cho, Chairman of the Fair Trade Commission. (File photo)

[Sejong=Asia Economy Reporter Joo Sang-don] The Fair Trade Commission (FTC) has decided to add items such as 'the concurrent holding of executive positions in affiliate companies by the controlling family and the ratio of outside directors from affiliate companies' to the analysis targets and disclose the results. This is intended to strengthen market monitoring functions for large business groups.

The FTC reported these key business statuses at the National Assembly's Political Affairs Committee audit held on the 8th.

Chairman Cho Sung-wook of the FTC said, "The FTC has focused on monitoring and strictly punishing unfair internal transactions that erode fair competition opportunities, and has prepared a comprehensive amendment to the Fair Trade Act containing key legislative tasks for improving the regulatory system of large business groups and fair economy. This has been submitted to the National Assembly. Going forward, we will continue to monitor industries with habitual legal violations to ensure that fair economy spreads throughout every corner of the market."

The main core tasks announced by the FTC on this day include six areas: eradicating abuse of economic power by large corporations; establishing inclusive buyer-supplier relationships based on fair trade; realizing an innovation ecosystem in new and growth industries; revitalizing market vitality through competition promotion in the livelihood sector; implementing customized consumer policies in the digital economy era; and fostering an autonomous culture of fair trade and coexistence.

First, to strengthen market monitoring functions aimed at eradicating abuse of economic power by large business groups, the FTC plans to improve information disclosure. As early as November this year, it will announce a 'Plan to Advance Information Disclosure on Internal Transactions and Governance Status of Large Business Groups.' The core is to add analysis targets such as the concurrent holding of executive positions in affiliate companies by the controlling family and the ratio of outside directors from affiliate companies. Until now, large business groups have individually disclosed the concurrent holding status of executives by the controlling family in affiliate companies, but the FTC plans to announce overall analysis results through the 'Internal Transactions Status of Publicly Disclosed Business Groups' and 'Governance Status of Publicly Disclosed Business Groups' published annually. An FTC official explained, "According to research results for improving information disclosure, providing such information will help market participants decide whether to invest in large business groups. It also has the aspect of inducing voluntary behavioral improvements by large business groups."

In addition, the FTC plans to improve board resolutions and disclosures of large-scale internal transactions, disclosures of important matters of unlisted companies, and disclosures of business group status in the first half of next year. Also, in December this year, it will revise related enforcement decrees to provide rewards for reporting false submissions of designated materials (shell affiliates).

The FTC is promoting regulatory strengthening to suppress the concentration of economic power by large business groups while enhancing both the quantity and quality of corporate disclosure information. Earlier, on August 31 this year, the FTC submitted to the National Assembly a comprehensive amendment to the Fair Trade Act to curb economic power concentration by large business groups, including unifying the scope of private interest infringement regulation to 20% for listed and unlisted companies; restricting voting rights and imposing disclosure obligations on public interest corporations; raising shareholding ratios of holding companies in subsidiaries and grandchild companies; restricting voting rights on existing circular shareholdings; improving voting rights restriction systems for financial and insurance companies; strengthening disclosure of overseas affiliates; and improving designation criteria for large business groups.

The FTC will continue monitoring subcontracting law violations in industries with frequent legal violations such as shipbuilding and construction, and plans to eliminate blind spots in monitoring through enacting the 'Act on Fairness in Online Platform Brokerage Transactions.' In November, it will conduct a fact-finding survey on transaction conditions such as commissions and the use of standard contracts for complex shopping malls and outlets newly included under the Distribution Industry Act. By the end of the year, it plans to establish review guidelines reflecting online characteristics to correct unfair practices by online shopping operators, which are difficult to regulate under the current offline-centered regulations.

To realize an innovation ecosystem in new and growth industries, the FTC plans to strengthen monitoring of monopoly abuse and significantly relax restrictions on holding company activities to activate investment and acquisition in venture companies.

Efforts will also be made to foster an autonomous culture of fair trade and coexistence. The FTC will rationalize the reduction of penalty points based on the usage rate of standard contracts to encourage the use of standard subcontract contracts, establish legal grounds for the Compliance Program (CP), and expand incentives such as fines reduction for companies operating effective CPs.

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