Naver, Nexon, and Netmarble Become Major Corporations... Inevitable Regulatory Shackles

[Image source=Yonhap News]

[Asia Economy Reporter Kang Nahum] Celltrion, Naver, Nexon, and Netmarble have been designated as mutual investment restriction business groups (large business groups), solidifying their status as major conglomerates. This is the result of rapid growth in the pharmaceutical and non-face-to-face markets due to the spread of COVID-19. These companies will be subject to stronger regulations, raising concerns that investment and growth could be stifled.

According to the Fair Trade Commission on the 30th, seven groups including Celltrion, Naver, Nexon, Netmarble, Hoban Construction, SM, and DB were designated as mutual investment restriction business groups after their total assets exceeded 10 trillion won the previous day.

The growth of business groups focused on the bio and IT sectors, which were heavily affected by COVID-19, was particularly notable. Especially, the four bio and IT companies saw their asset sizes increase by an average of about 4 trillion won. First, Celltrion’s total assets surged significantly due to stock value appreciation, company establishment through stock investment, and increases in sales and net income. Celltrion’s total assets jumped from 8.8 trillion won last year to 14.9 trillion won this year.

Naver’s total assets rose from 9.5 trillion won to 13.6 trillion won, Nexon’s from 9.5 trillion won to 12 trillion won, and Netmarble’s from 8.3 trillion won to 10.7 trillion won.

As these companies gain the status of large conglomerates, various regulations are expected to follow. These business groups, which are already subject to disclosure and reporting obligations and regulations against private interests of the controlling family as public disclosure business groups, will now also be prohibited from mutual and circular investments. Debt guarantees between affiliates will be banned, and voting rights in financial and insurance affiliates will be restricted.

However, there are concerns that such regulations could dampen investment and growth in the IT and gaming sectors. The regulations applied to public disclosure and mutual investment restriction business groups were created with a focus on manufacturing industries under the pretext of curbing economic concentration in large conglomerates. Applying the same regulations to IT and gaming companies, which have transparent governance structures and deal with intellectual property, is considered somewhat unfair.

There are calls for regulations tailored to the industries such as IT companies, but the Fair Trade Commission is unlikely to change its regulatory stance for the time being. Kim Jae-shin, Vice Chairman of the Fair Trade Commission, stated, "It is clear that IT groups show improved characteristics such as simpler and more transparent ownership structures compared to traditional conglomerates. However, that does not mean there is no risk of excessive expansion into non-core businesses or concerns about internal transactions. Since the controlling families are still first-generation, it cannot be said that there are no concerns about succession or private interests. It is still premature to exclude them from regulations."

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