SK Siltron did not take advantage of private interests… Response to administrative lawsuit against SK Fair Trade Commission sanctions

SK Group Chairman Chey Tae-won and SK Corporation filed an administrative lawsuit on the 15th, dissatisfied with the sanctions imposed by the Fair Trade Commission on the suspicion of embezzlement of SK Siltron’s private interests.

According to the business community, SK Corporation filed a lawsuit against the Fair Trade Commission’s correction order and penalty surcharge with the Seoul High Court on the same day. Chairman Choi also filed a similar lawsuit through his legal representative.

Chairman Choi and SK Co., Ltd. are reported to have analyzed the FTC’s sanction logic after receiving a resolution from the Fair Trade Commission regarding this case recently. Upon receiving a resolution on sanctions from the Fair Trade Commission, an objection must be raised or an administrative lawsuit must be filed within 30 days.

In December of last year, the Fair Trade Commission imposed a fine of 1.6 billion won, 800 million won each, for the purchase of SK Siltron shares by Chairman Choi and SK Corporation. The sanctions came out three years after the investigation began in 2018.

At that time, the Fair Trade Commission concluded that Chairman Choi had stolen the business opportunity of SK Corporation by purchasing his stake in Siltron. Chairman Choi expressed his intention to acquire the remaining stake in Siltron by ordering the review to the secretary’s office, but the logic is that SK Corp. conceded his business opportunity without reasonable review, resulting in unfair profits to Chairman Choi.

In response, SK Group immediately expressed regret for the imposition of the fine by the Fair Trade Commission and strongly opposed it, saying, “We will take necessary measures.”

The FTC’s action drew attention from the business community as it was the first time that a controlling shareholder took advantage of an affiliate’s business opportunity.

According to the FTC investigation, SK acquired 51% of Siltron shares owned by LG in January 2017 to strengthen its semiconductor material industry portfolio. After that, SK considered acquiring an additional stake in Siltron in order to satisfy the requirements of a special resolution at the general shareholders’ meeting and to prevent the emergence of the second largest shareholder. In April of that year, SK purchased an additional 19.6% of the remaining stake (49%) owned by KTB PE.

However, the remaining 29.4% owned by creditors such as Woori Bank was selected as the sole qualified investor by Chairman Choi participating in the sale bid, and was purchased through a total return swap (TRS) method in August of that year.

After SK acquired 70.6% of Siltron shares, the Fair Trade Commission was able to purchase all of the remaining 29.4%, but the FTC saw that the opportunity to acquire the remaining shares was passed on to Chairman Choi without any reasonable reason. In addition, despite the conflict of interests in which the CEO and controlling shareholder took the company’s business opportunity, he also took issue with the failure to comply with the decision-making procedures under the Commercial Act, such as the approval of the board of directors.

In response, the SK Group countered, “The non-acquisition of the remaining stake in SK was based on rational management judgment. After that, the acquisition of the remaining stake by Chairman Choi was conducted in a transparent manner as it was an open bid in which even foreign companies participated.”