SM Group Caught Channeling Apartment Projects and Funds to Chairman's Second Daughter's Company...Fair Trade Commission Launches Sanctions

Fair Trade Commission Initiates Sanctions on Improper Internal Transactions Using Affiliates
Development Rights Transferred to Company Owned by Second Daughter and Provided "Below-Market-Rate Loans"

The Fair Trade Commission has initiated sanction procedures after uncovering allegations that affiliates of SM Group—a major conglomerate specializing in shipping and construction—channeled lucrative apartment development opportunities exclusively to a company owned by the owner family and unfairly provided financial support worth tens of billions of won. The examiner determined the case to be severe and recommended not only imposing a fine but also filing a criminal complaint with the prosecution against both the corporation and individuals involved.

On June 22, the Secretariat of the Fair Trade Commission announced that it had sent a review report (equivalent to an indictment by the prosecution) to the respondents, outlining the illegality and recommended actions regarding the improper provision of benefits by six SM Group affiliates, including SMAMC Investment Loan, Samhwan Construction, and SM Line, and submitted the report to the Commission. This marks the beginning of the Commission-level deliberation process.

According to the review report, SMAMC Investment Loan and Samhwan Construction, both affiliates of SM Group, are accused of having transferred the entire development rights for the “Cheonan Seongjeong-dong Apartment Development Project”—which was expected to generate significant pre-sale profits in December 2022—to HN E&C, a private company owned by the second generation of the owner family. Through this exclusive transfer of the business opportunity, HN E&C secured a pre-sale revenue of 128.3 billion won and a pre-sale profit of 36.5 billion won. HN E&C is a construction company wholly owned (as of December last year) by Woo Ji-young, the second daughter of SM Group Chairman Woo Oh-hyun.

This improper internal dealing also extended to financial support. SM Line and SM High Plus reportedly provided loans at rates significantly below market levels to HN E&C, which had acquired the apartment development rights, in order to help it secure development funds. Additionally, SM Line extended similar low-interest loans to Samra Midas, another company owned by the owner family. According to the Fair Trade Commission examiner, the total amount of improper financial support provided reached 16.4 billion won for Samra Midas and 1.75 billion won for HN E&C, totaling 18.2 billion won.

The Secretariat of the Fair Trade Commission concluded that these actions constituted serious violations of Article 47 of the Monopoly Regulation and Fair Trade Act (prohibition of improper provision of benefits to related parties). The Secretariat recommended remedial orders, imposition of fines, and filing criminal charges against both corporations and individuals. The Commission plans to determine the final level of sanctions after reviewing written statements from the respondents and holding a plenary session.

The Fair Trade Commission emphasized, "We will continue to strengthen our monitoring of illicit transfers of wealth related to apartment development projects, including the provision of business opportunities and financial support."

This content was produced with the assistance of AI translation services.