Regulators examining whether trademark transactions were used to transfer profits among affiliates

The Korea Fair Trade Commission has launched an on-site investigation into Hanwha Group's intra-group trademark licensing transactions to determine whether any improper internal dealings took place.

According to industry sources, the Fair Trade Commission began the probe on Monday, targeting Hanwha — which serves in effect as the group's holding company — along with affiliates including Hanwha Solutions, Hanwha Life and Hanwha General Insurance. The investigation is expected to last about a week.

The Korea Fair Trade Commission at the Government Complex Sejong in Eojin-dong, Sejong [Newsis]
The Korea Fair Trade Commission at the Government Complex Sejong in Eojin-dong, Sejong [Newsis]

The Fair Trade Commission is focusing on whether the internal trademark fee transactions amounted to improper support for affiliates or were used to funnel private benefits to the controlling family.

Hanwha affiliates have long operated under brand licensing agreements with Hanwha, paying fees calculated by applying a set rate to revenue after deducting certain items such as advertising costs.

The commission is examining whether the fee-calculation methodology adequately reflects the characteristics of each business sector and the actual benefits derived from using the brand, sources said.

In general, a holding company collecting trademark royalties from affiliates is recognized as a legitimate business practice. However, because the economic value of a trademark is difficult to assess objectively, critics note that such arrangements can potentially serve as a vehicle for transferring affiliate profits to a holding company in which the controlling family holds a large stake.

A Fair Trade Commission official declined to comment, saying the agency "cannot confirm details of individual cases."


y2k@heraldcorp.com