Samsung Electronics slapped with $207 million fine over cafeteria contracts

Samsung Electronics, along with its four affiliates, were fined by the Korea Fair Trade Commission for awarding cafeteria contracts to Samsung Welstory, one of its affiliates, since 2013. The trade watchdog explained that it imposed the $207 million or ₩234.9 billion fine because the deal ensured a high-profit margin for the company.

Why Samsung Elec was fined

As per Reuters, Samsung Welstory is a meal provider for company cafeterias, and it is entirely owned by Samsung C&T. It was mentioned that the jailed Samsung Electronics’ vice chairman, Lee Jae Yong, has an 18.1% stake in this affiliate as of May and this is one of the reasons why the contracts are questionable and may have violated some of KFTC’s policies.

The KFTC said that Samsung Electronics and its affiliates unfairly bankrolled Samsung Welstory through signing private agreements with it since 2013. The commission explained this is not allowed because it just awarded the contracts without giving other cafeteria operators to compete, and obviously, Samsung Elec is favoring Welstory.

With the arrangement, Korea’s FTC said that the Samsung family owners greatly benefited from this. Thus, on Thursday, June 24, the regulatory agency imposed penalties on Samsung Electronics, Samsung SDI, Samsung Display, Samsung Welstory, and Samsung Electro-Mechanics.

Samsung’s response to the fine

In a statement, Samsung Electronics said that there was no unfair practice in the deals. It insisted that “no unfair support” took place in the dealings concerning the in-house cafeteria.

The company added that it strives to provide its workers with good-quality meals; thus, it has chosen the firm.

Samsung Elec added that to prove that there was nothing suspicious in the contracts, it is planning to show the documents for FTC to see that the transactions were standard. It will be challenging FTC’s decision after review, as per Pulse News.

Finally, Samsung Electronics lamented that the Fair Trade Commission’s announcement regarding the fine could mislead the public’s opinion. It said that it may affect the decisions and direction of investigations and trials that may happen in the future. Thus, it will take legal action to prove that the Welstory transactions were fair and normal under commercial terms.