[Issue! Q&A] Controversy Over the Designation System for Large Business Groups Triggered by Coupang

Introduced in 1986 to Prevent Excessive Economic Power Concentration by Large Corporations
Repeated Criteria Changes Due to Economic Conditions

Designated as Publicly Disclosed Corporate Groups if Assets Exceed 5 Trillion Won
"Korea is the Only Country Regulating Based on Size Itself... The System Should Be Abolished"

Kim Beom-seok, Chairman of the Board of Directors at Coupang. (Photo by 자료)

[Sejong=Asia Economy Reporter Joo Sang-don] The controversy over the designation of Coupang’s identical person ahead of the Fair Trade Commission’s announcement of the ‘2021 Publicly Disclosed Corporate Group Designation Results’ at the end of this month is showing signs of expanding into discussions on revising the large corporate group designation system. The system’s simple asset threshold of 5 trillion won has undermined the original purpose of preventing so-called chaebols’ concentration of economic power, gaining persuasive support. As the need for modification and supplementation of the system itself has been continuously raised, this controversy is likely to continue regardless of whether Kim Beom-seok, chairman of Coupang’s board, is designated as the head of the group.

Q What is the background of the controversy over Coupang’s identical person designation?

A The Fair Trade Commission designates corporate groups with total assets exceeding 5 trillion won as of the end of the previous year as publicly disclosed corporate groups every May 1st and designates the person who effectively controls the group as the identical person (head). Coupang’s total assets as of 2020 were $5.06733 billion (approximately 5.67 trillion won). The remaining issue is ‘who to designate as the identical person.’ The controversy arose when it became known that the Fair Trade Commission’s secretariat planned to designate Coupang’s identical person as the corporation ‘Coupang’ itself, effectively making it a corporate group without a head. Consequently, the Fair Trade Commission exceptionally placed the issue of whether to designate Chairman Kim as the head on the agenda for an emergency plenary meeting held on the 21st.

Q How has the large corporate group system evolved?

A The large corporate group system was introduced in 1986 within the Monopoly Regulation and Fair Trade Act to prevent ‘excessive concentration of economic power’ and was enforced from April 1 of the following year. The criteria for designating large corporate groups have been repeatedly changed according to economic conditions. In 1987, corporate groups were designated if total assets exceeded 400 billion won. In 1993, the criterion changed to being within the top 30 in asset ranking. This was revised again in 2002 to total assets exceeding 2 trillion won, and in 2008 to exceeding 5 trillion won. In 2016, the threshold was raised again to 10 trillion won, and the following year, groups with total assets over 10 trillion won were classified as mutual investment restriction groups, while those over 5 trillion won were designated as publicly disclosed groups, creating a dual system.

Q Concerns that the 5 trillion won asset threshold imposes various disclosure obligations and hinders corporate growth?

A There is growing concern that the 5 trillion won threshold for designating publicly disclosed corporate groups acts as a kind of ‘hurdle’ that blocks corporate growth. Professor Joo Jin-yeol of Busan National University Law School said, “The purpose of regulating large corporations is to regulate existing large corporations, especially those called chaebols, but since the current large corporate group regulation is based on size, companies inevitably become subject to it as they grow.” He added, “But when asked whether this is good for the Korean economy, the answer is absolutely no.” Regulating Korean large corporations competing in the global market simply because of their size could ultimately hinder Korea’s economic growth.

Q What are the improvement measures for the large corporate group designation system?

A The government decided at the end of last year, through a comprehensive revision of the Fair Trade Act, to link the designation criteria for mutual investment restriction corporate groups with total assets exceeding 10 trillion won to 0.5% of the domestic gross domestic product (GDP) to automatically reflect economic scale. However, many opinions hold that changing the criteria is only a temporary fix. A university professor said, “No country in the world regards economic power concentration itself as bad,” adding, “Instead, when large corporate groups’ bad behaviors cause negative social effects, those behaviors should be strongly regulated.” He continued, “Since the regulation of large corporate groups itself is based on size, modifying or supplementing it by raising the size threshold is meaningless.” This calls for a fundamental social discussion on the necessity of regulating large corporations.

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