0418-Parties hope to bring corporate crimes to heel with tougher laws

The political parties’ push for tougher regulations on misdeeds by large companies and executives are ruffling feathers in the business community.

As part of economic democratization, lawmakers from both the ruling Saenuri Party and the main opposition Democratic United Party are proposing revisions stipulating tougher punishments for corporate crimes and illegal trades among group affiliates.

Rep. Won Hye-young of the DUP and Rep. Min Hyun-joo of Saenuri are leading a revision bill for the Act on the Aggravated Punishment etc. of Specific Economic Crimes, calling for a drastic increase of jail terms given to conglomerate chiefs who make large financial gains through illegal means.

Under the proposed revisions, those who make illegal gains of more than 30 billion won ($26.8 million) could receive between 15-year and life sentences. For crimes leading to gains between 500 million won and 30 billion won, prison sentences ranging from three years to more than 10 years have been proposed.

In addition, Rep. Oh Jae-sae of the DUP has proposed to revise the Amnesty Act that will limit the president’s authority to pardon economic criminals.

Along with these, the parliamentary National Policy Committee is reported to be planning a revision of the Monopoly Regulation and Fair Trade Act.

According to reports, the committee’s plans will ban anticompetitive trade between affiliates in most cases, and the ceiling on the fines issued to such companies at 5 percent of their sales.

Large companies giving work to affiliates is a long-established practice in Korea, with as much as 14 percent of top 42 conglomerates’ annual sales being accounted for by such in-house contracts.

According to a recent data released by the Board of Audit and Inspection, some of the country’s largest conglomerates have used in-house dealings to support companies owned by relatives of the largest shareholders.

The data showed that Hyundai Motor Group directed a large part of its logistics needs to Hyundai Glovis, more than 80 percent of whose annual sales were accounted by services provided to the group.

Lotte Group’s retailer Lotte Shopping also engaged in similar practices, contracting companies with ties to itself to run confectionary stands at 47 of its 50 cinemas.

Companies will be exempted when the services or materials purchased in a transaction cannot be provided by non-affiliates, and when the contract is granted through open bidding.

In addition, companies suspected of unfair trading practices will become responsible for disproving allegations. At present, the Fair Trade Commission is charged with proving the guilt of companies suspected of anticompetitive transactions between affiliates.

There are, however, calls for caution within the political arena.

“It may be understandable during elections, but (the parties) should be careful not to break businesspeople’s drive by making it appear as though there are big problems with conglomerates and others without due cause,” Rep. Lee Hahn-koo, Saenuri Party floor leader, said at Monday’s supreme council meeting.

“Economy is an organism, and a characteristic of an organism is that it is easy to kill but difficult to revive.”