Fair Trade Commission imposes a 60.8 billion won fine on Hoban Construction for unfair support to second-generation company

On the 15th, the Fair Trade Commission issued a corrective order and a provisional fine of 60.8 billion KRW to Hoban Construction

The Fair Trade Commission imposed corrective orders and a fine of 60.8 billion KRW on Hoban Construction for continuously providing unfair support through various methods, including manipulative 'swarm bidding,' during the process of management succession. According to the Fair Trade Commission, Hoban Construction unfairly supported its second-generation companies by transferring large-scale projects expected to yield significant profits and providing free guarantees for PF loans amounting to about 3 trillion KRW.

On the 15th, the Fair Trade Commission decided to impose corrective orders and a fine of 60.8 billion KRW (tentative amount) on Hoban Construction for unfair internal transactions, including unfair support and providing business opportunities to Hoban Construction Housing and Hoban Industry, which are owned by the same controlling shareholder's second generation.

Mobilizing 'swarm bidding' and transferring profitable public land to second-generation companies

According to the Fair Trade Commission, Hoban Construction, controlled by the same corporate group owner, unfairly supported Hoban Construction Housing owned by the eldest son and Hoban Industry owned by the second son in public land development and construction projects. From late 2013 to 2015, when competition among construction companies for public land was fierce, the principle was to supply public land through a lottery system. Hoban Construction established multiple affiliates and even mobilized non-affiliated partners to participate in lottery bidding through 'swarm bidding,' securing many public land parcels, during which unfair support was executed.

Specifically, Hoban Construction lent the bid deposits for public land auctions to the second-generation companies free of charge 414 times. Each company participating in the public land lottery bidding must pay bid deposits worth tens of billions of KRW, but Hoban Construction paid these deposits on behalf of the second-generation companies.

Hoban Construction also transferred large-scale public land parcels expected to yield significant profits to the second-generation companies. All transferred public lands were those that Hoban Construction had secured after thorough business feasibility reviews and considerable efforts and costs, including swarm bidding. Nevertheless, the public lands were transferred with the intention of attributing future profits from public land development projects to the second-generation companies. In fact, 23 public land development projects generated sales revenue of 5.8575 trillion KRW and sales profits of 1.3587 trillion KRW.

They also provided free payment guarantees for PF loans totaling 2.6393 trillion KRW for 40 public land projects carried out by the second-generation companies. Although these companies had difficulty obtaining loans from financial institutions based on their own credit, thanks to Hoban Construction's guarantees, they were able to secure the necessary project funds for public land development. Additionally, Hoban Construction terminated ongoing apartment construction projects midway and transferred them to the second-generation companies, providing construction business opportunities worth 93.6 billion KRW.

Fair Trade Commission: "Repeated unfair support led to the growth of eldest son Kim Dae-heon's Hoban Construction Housing... management succession effectively completed"

The Fair Trade Commission explained, "As a result of this case, second-generation companies such as Hoban Construction Housing and Hoban Industry grew rapidly, significantly strengthening their positions in the residential real estate development and supply market as well as the general construction market, thereby undermining fair trade order." In particular, Hoban Construction Housing, owned by eldest son Kim Dae-heon, surpassed Hoban Construction in scale during the support period. The Fair Trade Commission stated, "At the time of the merger in December 2018, Hoban Construction was evaluated at a merger ratio of 1:5.89, enabling eldest son Kim Dae-heon to secure 54.7% of the shares in Hoban Construction, the representative company of the corporate group 'Hoban Construction,' effectively completing the management succession." It added, "This action is significant in that it uncovered acts that abused the public land supply system, designed for public interest such as housing stability, to facilitate the illicit transfer of wealth within the controlling family."

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