South Korea’s leading web portal operator Naver Corp. will be joining the country’s watch list of 57 large corporations that face stricter antitrust regulations along with four other companies.

The Fair Trade Commission (FTC) said on Sunday that it designated Naver and four other firms - Nexon Co., Hoban Construction Co., SM Group and Dongwon Group - as large conglomerates subject to tougher scrutiny and regulations of the country’s financial authorities.

Under Korea’s antitrust guidelines, companies whose assets exceed 5 trillion won ($4.42 billion) have to join the watch list of conglomerates and face more stringent regulations, including limits on inter-affiliate transactions and mandatory disclosures for all units. This means important issues regarding unlisted companies, major board decisions and all financial transactions have to be publicly disclosed. Failure of compliance could lead to corrective actions, fines and even prosecution charges.

Former Naver chairman Lee Hae-jin was also named the company’s representative individual holding legal and other responsibility, despite the company’s efforts to prevent the move. Last month Lee made a rare appearance at the FTC to make his case that Naver was an “ownerless corporation,” arguing that its management structure does not fall into the traditional chaebol category.

The antitrust agency dismissed Lee’s claims, however, saying he could still wield substantial control over Naver with his current stake of 4.31 percent as the company’s 50 percent stake is scattered among minor shareholders. Lee is also the only board member with a large stake in the firm and the sole inside director in the commission for recommending outside directors, the FTC noted.

Following the latest change, Naver is now obligated to publicly disclose important business issues related to its 71 units.

“This decision reflects the government’s outdated perspective which typecasts all large companies as chaebols with owners,” Naver said in a press release showing its discomfort about the FTC’s decision to designate Lee as its head.

Naver`s total assets have recently topped 6.6 trillion won after earnings of its affiliates, in particular Line Corp., its mobile app messenger operating affiliate, have significantly improved this year.

As of 11:21 a.m., shares of Naver fell 2.68 percent at 726,000 won.

Four other companies to join the list include Nexon, Korea’s leading game publisher, and Dongwon Group, a food processing and distribution firm whose assets jumped after acquiring the country’s third largest shipping company Dongbu Express. SM Group, which operates in the construction and vessel business, also saw its assets surge after buying 19 companies in recent years. Hoban Construction has grown into a major player amid the recent construction boom.

Hyundai Group was dropped out of the major conglomerate list as its assets shrunk from 12 trillion won to 2.6 trillion won following the sale of Hyundai Securities.

By Shin Hyun-kyu and Boo Jang-won

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]