Hankook Tire raided in unfair trading investigation

Prosecutors raided the offices of Hankook Tire & Technology Co. on 24 November as part of an investigation into alleged “unfair intra-affiliate trading”. According to the South Korean Yonhap news agency, investigators from the Seoul Central District Prosecutors Office seized documents from “the headquarters and offices of its affiliates in connection with suspicions of unfair business practices among the group’s affiliates”. Yonhap also reported that prosecutors specifically searched the office of Cho Hyun-bum, the chairman of Hankook Tire.

The news follows reports on 3 November 2022 that Hankook had been fined by regulators following similar charges. In that case, the antitrust regulator (Fair Trade Commission – FTC) imposed a fine of around 8 billion won (roughly US$6 million) on Hankook Tire for allegedly purchasing overpriced tyre moulds from its affiliate, Hankook Precision Works Co.

Yonhap reports that the regulator said the business practice at the centre of the dispute lasted from 2014 to 2017. Over the period, the operating profit-to-sales ratio of Hankook Precision Works reportedly shot up to 32.5 per cent from 13.8 per cent tallied for an earlier four-year period, Yonhap cited the FTC as saying.

Hankook Precision Works’s market share in the domestic tyre mould market also rose to 55.8 per cent in 2017, significantly up from 43.1 per cent in 2014. The regulator further concluded that Hankook Precision Works was also able to pay off its debt of 34.85 billion won incurred during its acquisition by Hankook Tire in 2011. In addition, Cho Hyun-bum, the head of Hankook Tire, and his brother Cho Hyun-sik reportedly received total dividends of 10.8 billion won between 2016 and 2017 from the tyre mould maker, according to FTC.

In early November, a Hankook Tire statement commented: “It is regrettable that (the FTC) has ruled an incomprehensible punishment, despite our proactive efforts to provide explanations”, adding: “As soon as we receive the written opinion from the FTC, we plan to review its content thoroughly and seek necessary measures”.