[Editorial] Chaebols' random venture investments

We can detect some indications to suspect that the country`s business conglomerates are making use of their venture investments as a means to circumvent taxes when their business owners want to leave properties or estates to their second or third generations through inheritance or operate their venture business as a disguised subsidiary firm to intensify the concentrations of their economic power.

The Fair Trade Commission has conducted a probe into the nation`s four largest business groups -- Samsung, Hyundai, LG and SK. The investigation is still underway about unlawful, cross business transactions among the same group`s family firms or subsidiaries. The Commission disclosed that it uncovered the chaebols` suspected, unlawful business assistance to the venture firms, which are owned by the second and third generations of the group`s owner. More factual details will unfold with the progress of the probe. But, the evidence it has gathered so far is said to be sufficient for it to punish the business conglomerates.

Some of these venture businesses owned by the second and third generations of the off-line business groups, are known to receive enormous business supports in capital and superior manpower. This obviously caused serious internal complaints within the group, so as to surface outside. The venture businesses with such huge support from their respective groups` family firms excel against other business firms in terms of future growth potential as well as business stability. This gives rise to raising the prices of stocks and shares of the venture firms owned by the groups` second or third generations. This certainly is a new trick through which chaebols` second and third generations can easily inherit wealth without paying much in inheritance taxes.

Chaebols have exploited the nation`s recent, friendly business environment for venture industries. In the name of new business management, they joined the venture industry with huge investments. Over half of the shares of these new venture firms are now owned by the chaebols` second and third generations.

According to the FTC, there are some groups which are virtual owners of venture firms but unlawfully excluded them from their family business as to make them a disguised subsidiary. Chaebols also own financial institutions such as banks or merchant banks. They manage the banking institutions and mobilize cunning tricks for their unlimited access to credits and loans at a low interest rate. They also act as an intermediary to supply capital for their family firms.

Solely on the strengths of superior technology and inventiveness, chaebols` aggressive, random expansion into the risks of venture business is by no means desirable in view of chaebols` inertia and lack of mobility. The venture businesses are well-known for their ups and downs often alternating between their massive creations and bankruptcies. Chaebols` venture investments must be inspired only by a strategic need to relate the group`s off-line business management.

Chaebols` random expansion into the venture industry will destroy fair competitions so as to stifle emerging prosperous venture firms. Moreover, the investments by chaebols` listed firms in the unlisted firms owned by chaebols` second and third generations will prejudice the interests of small shares owners of the group`s listed firms.

The FTC made it known that it will concentrate its investigation for the next two months on two groups of the four conglomerates, Samsung and SK, which have made bigger strides in venture investments than the rest. The FTC should not set itself a two-month time-limit for its investigations, but must conduct a water-tight probe to prevent the abuse of venture investment in unlawful trickery, for escaping taxes on inheritance of wealth.