The nation’s antitrust watchdog head said Thursday that it would take a tougher stance on conglomerates’ inter-subsidiary dealings, stressing that they benefit the interests of owner families and harm the business ecosystem of small firms and traders.

“We will make sure that such unfair practices will no longer be tolerated in the market through strict law enforcement,” FTC Chairman Kim Sang-jo said at a press briefing Thursday. 

He urged the owner families of conglomerates to sell off shares not relevant to groups’ key affiliates, referring to those in the areas of system integration, real estate, logistics and advertising. Most conglomerates, including Samsung, Hyundai Motor, SK, LG, CJ and SK, have affiliates in system integration.

Regarding members of owner families who do not participate in management, he said they need to separate affiliates if it is difficult to sell off shares.

“We cannot force the practice with laws. But if groups continue to carry out unfair intragroup deals, they will be subject to the FTC’s sanctions,” Kim said.

The FTC has carried out ex-officio investigations into the intragroup deals of 45 groups since the second half of last year. This year, it imposed penalties on the beverage company Hite Jinro in January and industrial conglomerate Hyosung in April over unfair practices.

The commission reported Park Tae-young, vice president of Hite Jinro and grandson of the group’s founder, to prosecutors over the charge of funneling contracts and business orders to the group’s affiliates.

Hyosung chairman and son of the group founder, Cho Hyun-joon, also faced a total of 3 billion won ($2.7 million) in penalties over similar charges.

According to a survey released this month by industry tracker CEO Score, the volume of intragroup deals of the nation’s top 225 companies stood at 12 trillion won, accounting for 13.6 percent of the total sales of 94 trillion won.

During the briefing, Kim also stressed that awarding contracts verbally and pressuring practices should also be rooted out, saying “it is a serious violation of laws.”

“The backward practice such as awarding contracts verbally and pressuring small firms to open technology documents still remain,” Kim said.

He said such practices could be a source of dispute so all business procedures should be carried out in writing.

In January, the related bill was revised to require the number of products supplied to be clarified on contracts. Otherwise, the contractors could be subject to a fine of up to 500 million won.

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