Korea's GS Caltex faces FTC probe into intra-group trading

The Korea Fair Trade Commission (FTC) has begun an investigation process for alleged intra-group transactions between GS Caltex Corp., the country’s second-largest oil refiner, and Samyang International Co., a trading firm controlled by GS Group family owners, The Korea Economic Daily understood on Friday.

The South Korean antitrust body undertook investigations at GS Caltex’s headquarters between Oct. 11 and 13 and secured data on the transactions.

GS Caltex is under probe for putting Samyang in the middle of overseas trading procedures, when the refiner could have directly contracted with its foreign counterparties, The Korea Economic Daily found.

FTC is investigating whether GS Caltex has carried out excessive intra-group trading that benefits Samyang.

Last year, Samyang bought 996 billion won ($736.1 million) worth of goods from GS Caltex and the refiner’s Chinese and Singaporean affiliates to sell them to a third party. The purchase amount increased by 45.1% from 2021 and nearly tripled from 2020.

Samyang, which trades tobacco, lubricant, golf equipment and construction materials, posted 306 billion won in revenue and 29.2 billion won in operating profit last year.

The trading firm distributed dividends worth 12 billion won in 2020, 15 billion won in 2021 and 10 billion won last year. As GS Group family owners hold more than 90% of Samyang shares, most of the dividends have been paid to them.

Kospi-listed Samyang Tongsang Co. Chief Executive Hur Joon-hong holds a 37.3% stake, while GS Executive Vice President Hur Seo-hong and GS Caltex CEO Hur Sae-hong respectively own 33.3% and 11.2%. The three are in the fourth generation of GS Group founding families.

Third-generation heirs, Samyang International Chairman Hur Kwang-soo and GS Caltex Honorary Chairman Hur Dong-soo, respectively hold 6% and 4.7%.

Under the Fair Trade Act, Korea imposes regulations on local companies of which controlling shareholders and affiliated persons hold a combined 20% or more of the company’s affiliate shares.

For example, such companies shouldn’t provide their affiliates with cash-cow business opportunities, and they shouldn’t trade with affiliates on a large scale without first considering partnerships with external firms.

GS Caltex will cooperate with the FTC investigation, the refiner told The Korea Economic Daily. The FTC said it can’t yet comment on matters under investigation.

Write to Han-Shin Park and Hyung-Kyu Kim at phs@hankyung.com

Jihyun Kim edited this article.