South Korea's antitrust watchdog yesterday rejected growing calls to ease regulations on big business groups, saying the policy helps strengthen the economy.
The groups, known as chaebol, said Seoul's longstanding anti-trust policies discriminate against them in favor of foreign competitors at a time when the economy is slowing down and force domestic companies into excessive competition with each other.
They also said South Korea should nurture its "national champions" to compete with leading global companies.
Kim Byung-bae, vice chairman of the government's Fair Trade Commission (FTC), dismissed the complaints.
"It goes against the principle of the market deciding on the winner and it also runs against a myriad of actual examples," he said.
He said Japanese automakers have grown to become global players through fierce competition in their domestic market while the South Korean market is monopolized by the Hyundai-Kia Automotive Group.
Selling some 850,000 units last year, the group accounted for more than 73 percent of the country's auto market.
Kim said the group's monopolistic position has resulted in reduced consumer benefits while an increasing number of buyers turn to foreign brands.
Government regulations ban chaebol and their subsidiaries from investing more than a quarter of their net asset value in other firms and from cross-investing in each other.
"The expansion through investment beyond the limit and cross-investment would hamper the growth of small and mid-sized firms and independent firms," Kim said.
Reckless expansion by the family-oriented conglomerates was partly to blame for South Korea's troubles during the 1997 to 1998 Asian financial crisis.
The founding families maintain a grip over their business empires despite their relatively small direct holdings through complicated chains of investment involving subsidiaries and associates.
"Chaebol are something unique in South Korea and we cannot talk about them being discriminated against in favor of foreigners," the FTC vice chairman told a meeting organized by the Korean Chamber of Commerce and Industry.
"Policies aimed at encouraging fair trade help enhance the competiveness of the economy and bolster momentum for economic growth," he said.
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