SeAH Fined 3.2 Billion KRW by Fair Trade Commission for Unfair Support to Affiliates

On the 25th, the Fair Trade Commission files charges against SeAH Changwon Specialty Steel Corporation

The corporate group SeAH has been issued a corrective order and fined 3.2 billion KRW by the Fair Trade Commission for unfair internal transactions. The Fair Trade Commission judged that the establishment of a special discount system for CTC, acquired by Lee Tae-sung, President of SeAH Holdings' personal company, which significantly increased sales, constituted unfair internal trading.

On the 25th, the Fair Trade Commission decided to impose a corrective order and a fine of 3.2 billion KRW on SeAH Changwon Specialty Steel, a member of the SeAH corporate group, for unfair internal trading. SeAH Changwon Specialty Steel, the party responsible for the unfair support, will be reported. It is accused of selling stainless steel pipes, the raw material, to its affiliate company CTC, a stainless steel pipe re-rolling company, at significantly lower prices than to other customers.

SeAH Changwon Specialty Steel is a company that produces various forms of stainless steel products such as wire rods, bars, and pipes. CTC purchases stainless steel pipes, the raw material, from SeAH Changwon Specialty Steel, re-rolls them, and then sells them. SeAH Changwon Specialty Steel had been selling stainless steel pipes to CTC, but after Lee Tae-sung, President of SeAH Holdings, acquired CTC through his personal company HPP, it sold the stainless steel pipes at significantly lower prices.

SeAH Changwon Specialty Steel established a highly favorable volume discount system for CTC and applied the maximum discount through this system to sell stainless steel pipes at low prices. By applying discounts higher than the normal discount amount, it sold at significantly lower prices compared to other non-affiliated companies, providing excessive economic benefits to CTC. The main product of CTC, steel sheets for semiconductors, is a highly competitive market that reacts sensitively even to a price difference of 1 KRW per meter. Yoo Sung-wook, Director of the Corporate Group Surveillance Bureau at the Fair Trade Commission, stated, “Other competitors were completely unaware of this volume discount system,” and “It was clear that the purpose of establishing this system was solely to improve CTC’s profits.”

Through such unfair support, CTC was able to secure significant price competitiveness compared to other competitors, and its sales volume increased significantly. Sales, which were 9.2 billion KRW in 2015 before the support, rose sharply to 15.3 billion KRW in 2016 and 26.3 billion KRW in 2017 during the support period, and from 2018, it became the top sales company in the same industry.

However, the Fair Trade Commission decided not to file charges against Lee Tae-sung, President of SeAH Holdings. Director Yoo explained, “Considering that the main purpose of this case was to improve CTC’s profits rather than an illicit succession of management rights,” and “Specific evidence is required for personal prosecution, but no objective data confirming that he instructed or was involved was found.”

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