SGC Group slapped with over $7.7 mn fine for unfair internal trade

The Fair Trade Commission (FTC) has imposed a fine of more than 10 billion won ($7.7 million) on SGC Group companies for unfair internal transactions for financial benefit, South Korea’s antitrust watchdog said on Thursday.

The fine comes after the FTC last year opened a probe on an allegation that SGC Energy Co. and SGC eTEC E&C Co. offered preferential treatment for their affiliate SGC Solutions Co. to win bids to supply bituminous coal to SGC Energy.

The three companies are siblings under SGC Group, which is also a family business group of Korean polysilicon and chemical major OCI Group. SGC Group Chairman Lee Bok-young is an uncle of OCI Holdings Co. Chairman Lee Woo-hyun.

The FTC has slapped the SGC affiliates with an over 11 billion won fine and corrective actions, it said.

According to the Korean antitrust regulator’s investigation finding, SGC Energy and SGC eTEC E&C in 2016 unfairly supported SGC Solutions, then grappling with deteriorating financial health, by rigging requirements for bituminous coal bids to SGC Energy.

They allowed the sibling company to fabricate product information and leaked confidential price information to enable it to win several bids.

They also ensured SGC Solutions had a stable supply of bituminous coal through a supply contract with Russian energy company Siberian Coal Energy Company (SUEK) and hired a coal trader to develop a bidding strategy for the company.

SGC Solutions enjoyed full support from its affiliates that even launched a task force to ensure SGC Solutions’ win in bituminous bids.

Thanks to the orchestrated group support, SGC Solutions won 13 out of 15 bids between May 2017 to August 2020, the FTC concluded. This accounted for the biggest 46% of the total 1.8 million ton in bids, tantamount to 177.8 billion won worth of bituminous coal.

The assistance allowed SGC Solutions to unfairly earn an estimated 6.4 billion won, of which 2.2 billion won was funneled to SGC Group Chairman Lee and others, according to the FTC.

Some raised issues with the fine, saying it is too low considering the transactions' grave impact on market competition.

But FTC Chairman Han Ki-jeong refuted this, noting that the fine is still more than the owner family’s unfair profit of 6.4 billion won.

The Korean antitrust watchdog did not file the case with the prosecution because the violation was to help their struggling affiliate ease financial stress, not for management succession, FTC Chairman Han said in a news conference on Thursday.

SGC Energy shares tumbled 4.8% to end at 24,000 won on Thursday, while SGC eTEC E&C closed down 3.4% at 23,100 won. SGC Solutions is not listed. 

Write to Han-Shin Park at phs@hankyung.com
Sookyung Seo edited this article.