HYBE must vibe with stricter rules with FTC’s ‘large corporate group’ designation

HYBE is now subject to the stricter set of rules applied to major conglomerates in Korea as the Fair Trade Commission (FTC) designated the K-pop powerhouse a “large corporate group” along with five other new additions to the list this year.

The number of large corporate groups came in at 88, encompassing 3,318 companies, according to the FTC’s announcement Wednesday.

The six new conglomerates added this year include HYBE, the first K-pop agency to make it on to the list, as well as hotel franchise operator Paradise Group, Hyundai Marine & Fire Insurance and Youngone Corporation.

The FTC lists conglomerates with over 5 trillion won ($3.7 billion) in combined asset value as large corporate groups every year, which are subject to stricter reporting duties and regulations.

Among those, conglomerates worth more than 0.5 percent of the country’s gross domestic production last year — which comes at 10.4 trillion won — are sorted into another subcategory, for which cross-ownership is prohibited. Forty-eight groups were named as such, with three added and two removed.

EcoPro, an EV battery material supplier, is one of the newly designated firms.

The top corporate asset value rankings remained largely the same from last year, with Samsung, SK, Hyundai Motor, LG and Posco in the top five. Further below on the list, biopharmaceutical company Celltrion climbed up 13 places to become the 19th largest corporate group, while Coupang jumped 18 spots to claim the 27th.

The designation system, designed to tackle potential malpractice by the chaebol families who control corporate groups, is considered unique to Korea and has been under criticism for being outdated in the current global business environment due to excessive regulation.

FTC Chair Han Ki-jeong, however, said that the need for such a system remains.

“The designation system exists to prevent owner families from bolstering their excessive, and possibly dubious control over a company and to curb any unfair internal transactions,” said Han during a press briefing held at the government complex in Sejong on Tuesday.

“If [such issues] are resolved, we will be able to discuss the abolition of the system, but at this point, the issues still remain.”

Meanwhile, Coupang has been at the center of the attention ahead of the FTC announcement over whether its founder will be named the legal representative, or de facto chief of the group by the regulator.

FTC designates who, or what, is the controlling party of a certain corporate group. The entities are subject to stricter rules about corporate practices.

Coupang CEO Bom Kim, who has been exempt from the designation due to his status as a non-Korean national, once again avoided the listing this year despite a change in the rule qualifying foreigners as corporate chiefs, thanks to an exceptive clause.

“With the latest revision in the rules, we have made clear that Bom Kim can be designated as the corporate chief if [Coupang] does not meet the criteria for the exceptive clause,” said Han, dismissing concerns about favorable treatment toward the New York-listed company.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]