BS Industry, a comprehensive real estate development company, has been referred to the Fair Trade Commission (FTC) on charges of unfairly supporting Korea D&I, a company owned by the second generation of the conglomerate's head, by selling unlisted shares at a low price to enable it to receive up to 37 billion won in dividend profits.

The FTC's secretariat announced today (30th) that it has submitted an examination report regarding the alleged violations of unfair support practices by BS Industry and Korea D&I, affiliates of the BS business group, to the commission and sent it to the respondents.

The examination report is a document detailing the illegality and sanctions opinions identified by FTC investigators during the investigation. The transmission of the examination report to the respondents signifies the initiation of sanction procedures.

Investigators suspect that BS Industry sold its stakes (unlisted shares) in two Project Financing Vehicles (PFVs) to Korea D&I in June 2020 at a price lower than the fair market value.

A PFV is a company established to carry out large-scale development projects, and once a project is completed, the business profits are distributed to shareholders and the company is liquidated.

It was found that BS Industry established the two PFVs to pursue public housing site development projects in Busan Eco Delta City Block 21 and Gyeonggi Uijeongbu Gosan Blocks C1 and C3.

Despite expecting substantial profits from these projects, the company sold the stakes to Korea D&I—which is 100% owned by the family of the head's eldest son—at a price lower than the par value of 5,000 won.

The investigators concluded that due to this unfair support practice, Korea D&I acquired the stakes in the two PFVs just four months after its establishment and reaped approximately 37 billion won in dividend profits through them.

The amount of unfair support, calculated as the difference between the fair market value of the shares of the two PFVs and the transaction price between the respondents, is estimated to be around 7 billion won, investigators stated.

Choi Jang-gwan, Director General for Enterprise Group Monitoring at the FTC, explained, "The transaction price between the respondents was in the high 2,000 won to 3,000 won range per share," adding, "The value we evaluated reflects future profits, showing a significant difference, but the specific amount is difficult to disclose as it will be contested during the deliberation."

The investigators deemed this unfair support practice to be a very serious violation of the Fair Trade Act and proposed issuing corrective orders and imposing surcharges.

The FTC plans to determine whether to impose sanctions and the level of punishment through a full commission meeting after going through procedures such as receiving written opinions from the respondents, accepting applications for viewing and copying evidence, and providing opportunities to state opinions.

(Photo: Capture from BS Industry website, Yonhap News)