 |
Photo courtesy of Yonhap News |
[Alpha Biz= Kim Jisun] Administrative sanctions against LS Group over alleged intra-group “toll fee” transactions designed to benefit the controlling family are effectively nearing conclusion after more than a decade.
According to regulatory authorities on April 5, the Korea Fair Trade Commission (KFTC) recently reimposed fines totaling KRW 18.325 billion on three affiliates—LS, LS MnM (formerly LS-Nikko Copper), and LS Global.
The move follows a ruling by the Supreme Court of Korea in July, which partially overturned the original penalty, citing improper calculation methods related to domestically produced copper transactions.
When combined with previously finalized fines related to imported copper transactions, the total penalty is expected to reach approximately KRW 25.364 billion—slightly lower than the amount initially imposed in 2018.
At the center of the case is LS Group’s establishment of LS Global in 2006 as an intermediary distributor, enabling the controlling family to extract profits through internal transactions. The group restructured its supply chain so that copper products produced by LS MnM were sold to affiliates via LS Global, effectively allowing the intermediary to collect “toll-like” margins.
Notably, LS Global was partly owned by 12 third-generation members of the controlling family, who collectively held a 49% stake. They later sold their shares in 2011, realizing approximately KRW 9.3 billion in gains—roughly 19 times their initial investment.
The KFTC characterized the arrangement as a “serious violation lacking economic rationality.”
While administrative sanctions have largely been finalized, legal risks for the controlling family remain ongoing. Prosecutors indicted senior executives, including Koo Ja-eun, in 2020 on charges of violating fair trade laws, and the criminal trial is currently underway at the Seoul Central District Court.
Meanwhile, charges against the late Koo Ja-hong were dismissed following his death in 2022.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
