Fair Trade Commission: "SYS Holdings Provided Unfair Support to Affiliate Electron Land by Offering Real Estate Collateral Free of Charge... Correction Order and Fine Imposed"

Support for Large-Scale Product Purchase Funds and Company Operating Funds at Low Interest Rates through Unfair Support

[Sejong=Asia Economy Reporter Joo Sang-don] The Fair Trade Commission announced on the 1st that it has decided to issue corrective orders and impose a total fine of 2.368 billion KRW on SYS Holdings, affiliated with the corporate group Goryeo Steel, for providing real estate collateral to enable its affiliate SYS Retail (formerly Jeonja Land) to borrow large-scale funds at low interest rates over a long period.

SYS Retail officially began its main business of home appliance distribution in June 1985 under the trade name 'Seoul Electronics Distribution.' In July 2001, at the time of a spin-off, it changed its trade name to Jeonja Land and then changed it again to SYS Retail in January 2012. During the 2001 spin-off, SYS Holdings was newly established through the spin-off of the leasing business division of the former Seoul Electronics Distribution. Most of the real estate assets owned by the former Seoul Electronics Distribution were transferred to SYS Holdings, which was established for leasing business purposes.

According to the Fair Trade Commission, SYS Retail's financial condition deteriorated from 2009, turning to a net loss, but large-scale borrowing was essential to purchase products from home appliance manufacturers or to pay rent and deposits for Jeonja Land branches. However, since SYS Retail itself had very few real estate assets to offer as collateral, making loan transactions with banks difficult, it requested its affiliate SYS Holdings to provide real estate collateral for borrowing funds.

In response, SYS Holdings provided 30 real estate assets, including land and buildings in Yongsan-gu, Seoul, which it owned, as collateral without any compensation in 2009, enabling SYS Retail to borrow 50 billion KRW in operating funds from Shinhan Bank. Based on the publicly announced land price, the collateral value of the real estate was 361.657 billion KRW in 2020. Even after that, until November 2021, SYS Holdings continued to provide collateral free of charge when extending existing secured loans or borrowing new funds.

As a result, from December 2009 to November 2021, SYS Retail was able to borrow a total of 659.5 billion KRW in purchase and operating funds from Shinhan Bank and NongHyup Bank at low interest rates ranging from 1% to 6.15%, across 195 transactions. A Fair Trade Commission official stated, "The interest rates applied to SYS Retail by Shinhan Bank and NongHyup Bank at that time were significantly lower than SYS Retail's individual normal interest rates, by at least 6.22% and up to 50.74%. SYS Retail not only was able to borrow a substantial amount of 659.5 billion KRW but also received excessive economic benefits amounting to 7.811 billion KRW due to the application of low interest rates."

The Fair Trade Commission judged that such unfair support lowered the risk of SYS Retail being excluded from the relevant market, maintained its position as a leading business operator through improved competitive conditions, and thereby hindered fair trade in the relevant market.

A Fair Trade Commission official said, "This measure is significant in correcting illegal acts that distort sound trade order, such as the use of unfair competition methods like free collateral provision among affiliates by mid-sized corporate groups, which could exclude small and medium-sized businesses from the market. Through this action, we hope that the principle of market competition based on price and quality will properly function in the home appliance distribution market, which many people use in their daily lives, thereby creating a fair competitive environment."

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