SK, group chief Chey fined 1.6 bln won over alleged unfair biz case

 South Korea’s antitrust regulator said Wednesday it has decided to fine SK Inc. and group chief Chey Tae-won a combined 1.6 billion won (US$1.3 million) over allegations that the company let him pocket undue profits related to its 2017 takeover deal.

Wrapping up a three-year long probe, the Fair Trade Commission (FTC) took punitive actions against SK Inc., SK Group’s holding company, and Chey on allegations that the company deliberately helped him gain huge profits in the process of its purchase of LG Siltron Co., a wafer manufacturer that was later renamed SK Siltron Co.

Even though the regulator has determined that the acts were illegal, it did not file a complaint with the prosecution over the case.

In January 2017, SK, formerly SK Holdings Co., bought a 51 percent stake in LG Siltron from LG Group for 18,138 won per share. It purchased another 19.6 percent stake in LG Siltron for 12,871 won per share in April that year.

The FTC judged that SK “directly and indirectly” allowed Chey to acquire a 29.4 percent stake in LG Siltron from creditor banks in August 2017. The company could have bought the remaining stake for about 30 percent cheaper as the stake did not have a management premium.

The regulator said the stake in question could have been a lucrative business opportunity for SK, but the company’s concession allowed Chey to reap “undue” profits.

Under the fair trade act, large business groups with assets exceeding 5 trillion won are banned from giving undue profits to their chiefs by providing lucrative business opportunities.

The FTC said Chey allegedly reaped nearly 200 billion won in profits, when the share value of the stake is calculated.

The commission decided to impose a tentative fine of 800 million won on SK and Chey each. It also ordered them not to repeat similar actions in the future, but it did not mean Chey must sell the 29.4 percent stake in SK Siltron.

It marked the first anti-trust ruling that has been taken against a controlling stakeholder’s misuse of business opportunities of an affiliate.

SK said the FTC decision was difficult to accept.

“It is regrettable that the FTC handed down the punitive actions and we see it as difficult to accept, even though we fully explained our stance,” SK said in a statement.

SK said that it plans to take necessary measures after deliberation, indicating that it would file the appeal with the Seoul High Court over the FTC’s decision.

The FTC’s ruling came a week after Chey made a rare appearance at a deliberation session by the FTC over the case.

A civic group criticized the FTC’s move not to refer the case to the prosecution, saying the decision is tantamount to “exonerating” Chey.

The FTC’s decision “affirmed Chairman Chey violated the fair trade law. But in light of the level of punishment, the regulator effectively exonerated him,” Solidarity for Economic Reform said.

The civic group called on the prosecution to exercise the authority to request the FTC to file a complaint and urged SK shareholders to file a derivative lawsuit against Chey.