SK Group’s Chey rebuts FTC charges of unfair business practice

South Korea’s Fair Trade Commission has imposed a fine of 1.6 billion won ($1.3 million) on SK Group Chairman Chey Tae-won and the conglomerate’s holding company SK Inc. over allegations that they were involved in an illegal business practice with regard to a 2017 stake purchase deal.

Chairman Chey, however, denied the allegations on Wednesday, and the group vowed to take action, including a possible appeal to a court, as soon as it receives a written notice of the antitrust regulator’s decision.

The FTC’s ruling marks the first time that a top Korean business leader has been penalized for alleged misuse of business opportunities.

Wrapping a three-year probe into the case, the FTC on Wednesday concluded that SK Inc., formerly known as SK Holdings Co., deliberately allowed the group leader to buy a stake in LG Siltron Co., a local silicon wafer manufacturer, to make personal gains from the deal.

In January 2017, SK Inc. bought 51% of LG Siltron, which later was renamed SK Siltron Co., as part of the conglomerate’s efforts to foster new growth drivers.

Instead of buying the remaining 49% stake to gain full control over the promising wafer business operator, SK purchased an additional 19.6% stake in April of that year, and let Chey buy into 29.4% of the company in August 2017.

The FTC judged that SK’s 49% stake purchase would have been a lucrative business opportunity for the company and its shareholders, but its concession allowed Chey to reap “undue” profits.

SK Inc. didn’t even hold a board meeting to discuss the matter, the regulator said.

‘PROFITEERING UNTHINKABLE’

Since the allegations were raised by a civic group three years ago, SK Group has said there’s nothing illegal throughout the process of the conglomerate’s and Chey’s acquisitions of LG Siltron stakes.

Chey participated in open bidding to acquire the 29.4% stake in a fair manner, and his purchase didn’t require board approval as advised by the group’s governance committee made up of outside directors and legal counselors, according to SK Group.

Last week, Chey made a rare appearance at an FTC session to clarify his stance on the matter.

He said at the time that he purchased the stake at his own risk because he didn’t know if LG Siltron’s shares would rise or fall, and judged that his purchase would help the group guard against a possible hostile takeover bid.

The chairman also said he was under a prosecution investigation into big business leaders, including himself, over a bribery case involving a former South Korean president, that he couldn’t think of being engaged in any other wrongdoing.

“As the SK Group chairman, it is unthinkable to try to make personal gains to the detriment of SK’s corporate interest,” he said.

Following the regulator’s ruling, SK Inc. said in a statement: “It is regrettable that the FTC handed down the punitive action, and we see it as being difficult to accept, even after we fully explained our stance."

SK said it is considering various ways to deal with the FTC’s decision, signaling that the group may take the issue to a local court.

While imposing a fine of 800 million won each on SK Inc. and Chey, the FTC said it is not filing a legal complaint with the prosecution against SK and its leader over the case.

With regard to criticism that the fine is insignificant for a big conglomerate like SK, the regulator said it will look into related laws for a possible revision.

Write to Ji-Hoon Lee and Kyung-Min Kang at lizi@hankyung.com
In-Soo Nam edited this article.