Second-Generation Head's Company Sells 'Alzzat Land'... Daebang Construction Faces Fair Trade Commission Sanctions

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The Korea Fair Trade Commission (KFTC) has reported Daebang Construction to the prosecution for unfairly supporting its subsidiaries by transferring public land, expected to yield massive development profits, to companies owned by the chairman's daughter and daughter-in-law. Daebang Construction and its subsidiaries, including Daebang Industrial Development and Elyum, were fined a total of 20.56 billion KRW in penalties.

On the 25th, the KFTC announced that it imposed corrective orders and fines for violations of Article 23, Paragraph 1, Item 7 of the Monopoly Regulation and Fair Trade Act (Fair Trade Act) by companies affiliated with the Daebang Construction corporate group, and decided to refer the supporting entity, Daebang Construction Corporation, to the prosecution.

Regarding the decision not to prosecute Chairman Koo Gyo-woon, the KFTC explained, "The score used to determine whether to prosecute under the guidelines fell short," and "No evidence was found that the chairman was aware of the legal violations."

The fines by company are as follows: Daebang Construction 12 billion KRW, Daebang Industrial Development 2 billion KRW, Elyum, Elyum Development, and Elyum Housing each 1.12 billion KRW, and DI Development and DI Construction each 1.6 billion KRW.

Daebang Construction is ranked 23rd in construction capability evaluation (as of 2024), with the second-generation son of the same owner, Koo Chan-woo (71%), as the largest shareholder, and the son-in-law, Yoon Dae-in (29%), holding the remaining shares.

Public Land Resale Transaction Structure (Source: Korea Fair Trade Commission)

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According to the KFTC, from November 2014 to March 2020, Daebang Construction resold six public land sites to Daebang Industrial Development, owned 50.01% by Chairman Koo Gyo-woon's daughter Koo Soo-jin and 49.99% by daughter-in-law Kim Bo-hee, and its five subsidiaries.

The public land sites resold by Daebang Construction to Daebang Industrial Development and others were located in Seoul and metropolitan area new towns and innovation cities such as Magok, Dongtan, Jeonnam Innovation, and Chungnam Naepo, prime locations rich in development prospects.

Daebang Construction secured public land through so-called "swarm bidding," a method of collusive bidding using multiple affiliates to increase the chances of winning the bid.

Daebang Industrial Development and others, who purchased the public land for a total of 206.9 billion KRW, recorded sales of 1.6136 trillion KRW through development projects. This accounts for 57% of Daebang Industrial Development's total sales and 100% of the five subsidiaries' total sales. Excluding land costs, they earned a total operating profit of 250.1 billion KRW.

Additionally, Daebang Industrial Development, which monopolized construction work on the six land sites, jumped from 228th place in construction capability evaluation in 2014 to 77th place last year. As of 2023, its total assets increased 5.9 times, and sales increased 4.26 times.

The five subsidiaries of Daebang Industrial Development were also able to meet the first-priority subscription qualification requirements (construction performance of more than 300 housing units over three years) for public land supplied by the Korea Land and Housing Corporation through a lottery, thanks to unfair transactions.

The KFTC also confirmed that three of the six land sites were resold under the direction of Chairman Koo Gyo-woon. It was investigated that Chairman Koo gave instructions to assign "new projects" when a decline in Daebang Industrial Development's performance was expected or when development land was insufficient.

Although these actions could have been punished as "private benefit extraction by the controlling family," prohibited under the Fair Trade Act since Daebang Construction is a publicly disclosed corporate group, the KFTC applied unfair support regulations applicable to all corporate groups because the acts occurred before the group was designated in 2021.

Han Yong-ho, Director of the Corporate Group Surveillance Bureau at the KFTC, stated, "We have detected and sanctioned acts that abused public land, supplied for public interest purposes such as housing stability, as a means to support second-generation owned companies," adding, "We have once again confirmed that resale of public land secured through collusive swarm bidding among affiliates can constitute unfair support."

He continued, "We expect that in the future, public land will be supplied fairly to real demanders with business capabilities, contributing to the stabilization of the housing market."

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