‘OCI’ Favoring Core Affiliates with Worsening Profits... Fair Trade Commission Imposes 11 Billion KRW Fine

On the 6th, the Fair Trade Commission imposes a 11 billion KRW fine on the corporate group 'OCI'

The Fair Trade Commission announced on the 6th that it has decided to impose corrective orders and a provisional fine of 11 billion KRW on the business group ‘OCI’ for unfair support practices, such as funneling affiliate orders, to improve the liquidity of Samkwang Glass, whose profit and loss structure has deteriorated.

According to the Fair Trade Commission, the business group ‘OCI’ is divided into three subgroups. Among them, Samkwang Glass, located at the top of the governance structure of the Samkwang Glass subgroup controlled by Chairman Lee Bok-young, experienced a deterioration in its financial condition in its core business in 2016. At that time, E-Tech Construction (currently SGC E-Tech Construction Co., Ltd.) was made to conduct the sourcing business (procurement and logistics) of thermal coal for Samkwang Glass, which constituted the support activities.

In February 2017, E-Tech Construction, acting as the de facto representative company of the Samkwang Glass subgroup and performing overall group operations, decided to funnel thermal coal sourcing volumes from Gunjang Energy to Samkwang Glass to support it. To this end, E-Tech Construction and Gunjang Energy continuously engaged in irregular support activities such as ‘volume funneling’ to allow the new entrant Samkwang Glass to enter the thermal coal sourcing business stably.

Specifically, from May 2017 to August 2020, a total of 15 competitive bids were conducted, and irregular methods were used to ensure that Samkwang Glass could win the bids. During this process, Samkwang Glass also received bidding implementation materials considered trade secrets from E-Tech Construction and Gunjang Energy. As a result, despite being a new entrant in the domestic thermal coal supply market, Samkwang Glass became the largest supplier, supplying 1.8 million tons, which is 46% of Gunjang Energy’s total bid volume, worth approximately 177.8 billion KRW.

Various support activities were also carried out for Samkwang Glass during this volume funneling process. E-Tech Construction formed a task force involving all affiliates within the subgroup to plan and prepare for the execution of the business to funnel Gunjang Energy’s thermal coal supply to Samkwang Glass. E-Tech Construction also hired coal training experts to assist Samkwang Glass in establishing its bidding strategy.

The Fair Trade Commission stated, “This measure is significant in that it detected and sanctioned acts of supporting an affiliate with deteriorated profit and loss within a large business group to start a new business based on the purchasing power of other affiliates, and effectively maintaining and strengthening the control of related parties within the subgroup by funneling volumes through nominal bidding.” It added, “We confirmed that even if transactions with affiliates are conducted through competitive bidding, acts that allow affiliates to win bids through irregular methods may constitute unfair internal transactions.”

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