Fair Trade Commission Introduces Voluntary Regulation on Intra-Group Transactions... Incentives Provided for Exemption from Ex Officio Investigations

Soft Norms Without Enforcement Power... The Key Is Whether Companies Choose to Comply

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[Asia Economy Reporter Jang Sehee] The Fair Trade Commission is introducing a norm to encourage large corporations to share internal transaction work with small and medium-sized enterprises (SMEs). Chairman Cho Seong-wook is scheduled to announce this soon after meeting with logistics companies affiliated with large corporations.

According to government sources on the 10th, Chairman Cho plans to hold a work-sharing agreement ceremony and announce policies after the quarantine situation stabilizes, meeting with logistics companies belonging to large corporate groups and their client companies. Companies that generate significant sales through internal transactions among affiliates, including Hyundai Glovis of the Hyundai Motor Group, are expected to sign agreements with the Fair Trade Commission.

The norm the Fair Trade Commission intends to establish will quantify the performance of sharing internal transaction work with SMEs by company and use it in the evaluation of compliance with fair trade agreements. Top-performing companies will receive incentives such as exemption from ex officio investigations. Additionally, for industries with a high proportion of internal transactions, such as logistics and system integration, voluntary compliance standards for work sharing will also be created.

The government expects this to have a preventive effect on illegal activities. However, since this norm is a soft regulation without binding force, whether large corporate group affiliates will allocate internal transaction work to non-affiliated SMEs remains entirely up to the companies' discretion.

Although the Fair Trade Commission has sanctioned many corporate groups for preferential work allocation over the years, as of 2019, the amount of internal transactions within publicly disclosed corporate groups reached 196.7 trillion won, indicating that the practice of sharing work within the group remains widespread.

Logistics companies tend to generate a significant portion of their total sales from affiliate work. For example, Hyundai Glovis had an internal transaction ratio of 21.57% relative to sales as of 2019.

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