Trade watchdog chief issues strong warning against conglomerates

“We often get tips that conglomerates are forcing (smaller companies) to provide supplies at dumping prices these days.”

Noh Dae-rae, 57, head of the Fair Trade Commission, warned against big companies. According to him, there have been cases where conglomerates are forcing small and medium-sized companies to engage in fierce competition and cut supply prices in the course of outsourcing what they conventionally sourced through internal trading from affiliates and placing open bids to dodge controversy over their “exclusive dealing with affiliates.”

At a “meeting on the new government’s fair trade policy,” hosted by the Fair Competition Federation at Lotte Hotel in central Seoul on Friday, Noh made the remarks as he introduced the new government’s fair trade policy to some 100 participants, including executives from conglomerates and mid-sized companies.

“Cutting supply price by repeatedly holding bids is an act that would anger the general public all the more,” Noh said, adding, “Conglomerates should conduct business through normal process.”

He also reiterated his determination to root our price-fixing practices. “Since companies only end up paying small amounts of fine when filed suits, we will proactively consider filing suits against individuals (executives) as well if companies are caught for cartel.”

Noh also refuted issue by issue objections by conglomerates over “ban on new circular shareholding,” an election pledge of the new government. “There are claims that the ban on new circular shareholding will increase the possibility for foreigners to take over Korean companies, which could encounter insufficient funds for mergers and acquisitions, and that it could cause a serious loss of national wealth as a result,” Noh said. “But an analysis of large M&A deals for the past five years showed their claim is groundless,” flatly denying the argument.

“There are many different ways to secure funds even without circular shareholding, including consortiums, capital increase, and leveraged buyout,” Noh said. “Rather, the bigger problem is that after successfully forging M&A deals, they form the chain of circular shareholding to defend their managerial control.”

He also said third and fourth generation owners of conglomerates should arm themselves with "entrepreneurship." “First generation owners of chaebol (conglomerates), who frequented worksites, would drink makgeolli (rice wine) with workers, and called for ‘job security’ by themselves, thus maintaining close ties with the general public,” he said. “Third and fourth generation chaebol owners are only penetrating the existing market, including neighborhood mom and pop shops.”

“Looking at this from the perspective of national economy, such practices lead to reduction of wages and jobs, which causes the collapse of the middle class. “If third and fourth generation chaebol owners engage in fair competition by entering new markets, the general public will sympathize with them,” he added.