A 60.8 Billion Won Fine Imposed by the Fair Trade Commission... Hoban Construction Announces "Strict Compliance Management Measures"

Support for 2nd Generation Company Through Swarm Bidding
Sales and Profit Growth in Sales... Completion of Management Succession
Fair Trade Commission: "Unfair Internal Transactions Disrupt Market Order"

Hoban Construction stated that it will "establish stricter compliance management standards and make greater efforts to fulfill corporate social responsibility" following a 60.8 billion KRW fine imposed by the Fair Trade Commission (FTC) for unfair internal transactions supporting the second-generation companies of the group head through 'swarm bidding.'

On the 16th, regarding the sanctions announced by the FTC, Hoban Construction said, "Regardless of the outcome, we sincerely apologize for causing concern to many people, including customers, partners, and company members."

Earlier, the Fair Trade Commission imposed corrective orders and a fine of 60.8 billion KRW on Hoban Construction for unfair internal transactions that improperly supported companies owned by the second generation of the same owner and other related parties, providing them with business opportunities. This fine is the third largest ever imposed by the FTC for unfair internal transactions.

According to the FTC, Hoban Construction created several affiliates between late 2013 and 2015 and used even non-affiliated companies to increase winning chances through a swarm bidding method to secure public land. The 23 public land parcels won this way were transferred to the two sons’ companies (Hoban Construction Housing and Hoban Industry). Thanks to this, these companies achieved sales revenue of 5.8575 trillion KRW and sales profit of 1.3578 trillion KRW.

In addition, Hoban Construction provided interest-free loans of tens of billions of KRW in bid deposits 414 times when the two sons’ companies participated in public land bids. Hoban Construction also provided unconditional payment guarantees for project financing (PF) loans amounting to 2.6393 trillion KRW to the second-generation companies and transferred apartment construction projects worth 93.6 billion KRW.

The FTC judged that these supports caused the second-generation companies to grow rapidly and significantly strengthen their positions in the residential real estate development and supply market as well as the general construction market, thereby undermining fair trade order. Based on this growth, the FTC concluded that during the 2018 merger of the two companies, the eldest son naturally secured more than half of Hoban Construction’s shares, completing the succession of management rights. However, the FTC decided not to refer the group head to the prosecution because the statute of limitations of five years had passed since the main period of unfair support.

In response, Hoban Construction said, "We regret that our opinions were not accepted despite sufficient explanations during the investigation process," adding, "We will review the decision document after receipt and proceed with future procedures."

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