FTC’s New Amendment Raises Controversy

The ceiling of ownership of voting-right shares in financial subsidiaries of conglomerates with two trillion won in assets and more will be lowered gradually starting as early as the end of next year.

The Fair Trade Commission’s temporary right to demand information on financial transactions, or the right to track financial accounts, will be likely extended by three years, and the ownership ceiling in non-subsidiary companies will be likely lowered to less than five percent.

At a policy coordination meeting on May 3, the Uri Party’s floor leader, Kim Geun-tae, its policy commission chair, Chung Se-kyun, and FTC chairman Kang Chul-kyu agreed to an amendment of the law on the Fair Trade Commission allowing the two measures.

The ownership restrictions are aimed at stopping big corporation owners from buying subsidiaries shares with their financial units’ money to enforce their control on subsidiaries.

The FTC will initially lower the ceiling of ownership of voting right shares to 15 percent from 30 percent. The watchdog will eventually repeal the restrictions.

“The new amendment will likely take effect by year-end,” said chairman Kang. “The reduction in the ceiling will take effect by the end of the next year after a one-year moratorium.”

Corporate Korea raised concerns about the amendment and said, “The restrictions on the ownership of voting-right shares by financial subsidiaries will increase chances for hostile M&As by foreign capital. There are 29 corporation conglomerates with two trillion won in assets which have financial subsidiaries, with Samsung Electronics, LG Electronics and Hyundai Motor among them.

The Uri Party and the government agreed to a three-year extension of the FTC’s right to track financial transactions, which expired on February 4, to allow the watchdog to investigate insider dealings.

They will ease regulations on cross holdings for conglomerates with five trillion won in assets by establishing some provisos.

Young-Hae Choi Chi-Young Shin yhchoi65@donga.com higgledy@donga.com