The Korean Fair Trade Commission said it ordered Samsung SDI on Monday to sell its remaining 4 million shares in Samsung C&T Corp. to further resolve Samsung’s circular chains since the merger between Samsung C&T and Cheil Industries in 2015.

Monday’s order is a follow-up measure after the antitrust watchdog decided in December to change its earlier stance of having the affiliate discard only 5 million shares out of the total 9 million shares. A final decision was made by the Office for Government Policy Coordination last week. 

The FTC informed Samsung on the day and granted a grace period of six month. If Samsung does not follow the order within the deadline, regulators could take punitive measures that include a fine.

“Regardless of legitimacy of the interpretation, we will look for a solution within the grace period,” said a Samsung SDI official.

In 2014, the FTC revised the fair trade law to prohibit the creation of a new link of cross-shareholding of conglomerates’ affiliates in order to tighten rules on chaebol.

But it did not make clear whether a new formation through merger and acquisition should be interpreted as a new link or simply the strengthening of cross-shareholding.

The FTC initially viewed that the merger between Samsung C&T Corp. and Cheil Industries was seen as the strengthening of cross-shareholding, not a new link. It had ordered Samsung SDI to sell only 5 million shares in Samsung C&T out of the total 9.04 million shares held by Samsung SDI.

The FTC, however, changed its stance in December, saying the merger is now seen as a new link. It then decided to force Samsung SDI to additionally sell the remaining 4.04 million shares that are estimated to be worth some 520 billion won.

The FTC said that when new mergers take place among other conglomerates, the same law will be enforced.

“Companies planning to have a merger should be well informed of this rule so as not to violate the law,” a FTC spokesperson said. 

By Shin Ji-hye (shinjh@heraldcorp.com)