Despite complaints from Samsung and LG, the South Korean government has passed a bill to regulate the amount of investment that influential chaebols in the country can inject into their affiliated companies. This new Fair Trade Act will halve the conglomerates' voting rights in their affiliates to 15% by 2008. In addition, the decree authorizes the Fair Trade Commission to supervise chaebols' bank accounts to eradicate any unlawful transactions between subsidiaries.

 

Additionally, to prevent chaebols from expanding into non-core businesses, the new act disallows 18 chaebols holding assets of more than five trillion KRW (US$4.8 billion; 1US$=1,048 KRW) to invest over 25% of their net worth in another company.

 

Large domestic firms Samsung and LG pleaded against the bill, claiming that the Fair Trade Act will leave them vulnerable to takeovers from foreign shareholders. However, the government insists that the legislation is a means to protect the rights of consumers and smaller companies.