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Photo = Fair Trade Commission |
[Alpha Biz= Kim Jisun] Seoul, June 9 – South Korea’s Fair Trade Commission (KFTC) announced on June 9 that it has imposed corrective orders and a fine totaling KRW 18.021 billion (approximately USD 13 million) on Jungheung Construction, the developer behind the “Jungheung S-Class” apartment brand, for unfair support to a company owned by the founding family.
The company provided uncompensated credit guarantees worth KRW 3.2 trillion over a period of 10 years to Jungheung Togeon, a construction company wholly owned by Vice Chairman Jung Won-joo, the second-generation heir of the group. This support, according to the KFTC, facilitated the succession of management control to Jung.
From July 2015 to February 2024, Jungheung Construction issued 24 credit enhancements for 12 real estate development projects initiated by Jungheung Togeon, without receiving any compensation. The total credit support amounted to KRW 3.2096 trillion.
In return, Vice Chairman Jung allegedly benefited from increased share value, KRW 65 billion in dividends, and KRW 5.1 billion in salary.
The KFTC concluded that this support was part of a deliberate management succession strategy, transitioning control of the business group to Jungheung Togeon, the central entity now fully owned by the son. At the time of acquisition in 2007, Jungheung Togeon was a small-scale construction firm worth just KRW 1.2 billion, incapable of independently securing large-scale project financing.
Unlike typical credit support arrangements—where third parties such as builders or financial institutions demand equity or fees in return—Jungheung Construction provided free guarantees, foregoing at least KRW 18.1 billion in potential revenue, which allowed Jungheung Togeon to easily raise KRW 2.9 trillion in funds.
The KFTC noted that Jungheung Togeon and its affiliates generated KRW 6.678 trillion in revenue and KRW 1.0731 trillion in profit (as of the end of 2023), and that the firm’s construction capability ranking soared from 82nd in 2014 to 16th in 2023. Most notably, Jungheung Togeon acquired Daewoo E&C, South Korea’s fifth-largest builder, in 2021.
Although Jungheung Construction will be referred for prosecution, the KFTC did not include group chairman Jung Chang-sun in the criminal complaint, citing a lack of direct evidence that he personally received reports about the uncompensated guarantees.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
