Although internal transactions of business groups have positive aspects such as increased efficiency and reduced transaction costs due to vertical integration, it is true that the negative aspects are being more highlighted because of the characterist...
Although internal transactions of business groups have positive aspects such as increased efficiency and reduced transaction costs due to vertical integration, it is true that the negative aspects are being more highlighted because of the characteristics of the ownership and governance structure of Korea's chaebols, which exercise management rights over the entire business group based on a high internal shareholding ratio secured through a circular shareholding of affiliates or specially related parties or a holding company. Accordingly, in addition to the conventional prohibition of acts of unfair support, the revision of the Fair Trade Act in 2013 newly established a provision prohibiting acts of providing unfair benefits to specially related parties.
As the history of regulation is short, the first judgment to which Article 23-2 (1) of the Fair Trade Act was applied was finally pronounced by the Supreme Court in May, 2022 (decision 2017두63993 on May 12, 2022). Afterwards, the Hite Jinro case (on May 26, 2022. 2020두36267), the corporate group Hyosung case (on November 10, 2022.
2021두35759), and the corporate group Taekwang case (on March 16, 2022. 2022두38113), Supreme Court decisions were passed one after another. Each judgment is significant in that it clearly clarified its position on several issues on which opinions were divided over the interpretation of Article 23-2 of the Fair Trade Act.
In this article, we briefly review the significance of the provision of unfair benefits to specially related parties and controversial issues, and focus on the legal principles newly declared by the Supreme Court in the Hanjin, Hite-Jinro, Hyosung, and Taekwang cases. In particular, with regard to the meaning and burden of proof of ‘attribution of unfair profits’ through the Hanjin case, whether or not indirect transactions were included in the act of providing unfair profits to a specially related parties through the Hyosung case, and the meaning and the judging criteria of ‘involvement’ in the act of providing unfair benefits to a specially related parties(Article 23-2, Paragraph 4 of the former law) through the Taekwang case, will be reviewed.