The KFTC imposed a cease and desist order and levied approximately USD 34.7 million in administrative fines, in its finding that seven affiliates of the SK Group engaged in unlawful intergroup aid by entering into long-term IT outsourcing agreements with their affiliate, SK C&C, the terms of which were not at arms-length.
Lee & Ko represented the SK affiliates in an appeal filed in the Seoul High Court against the KFTC and the Seoul High Court overturned the KFTC’s decision. On appeal by the KFTC of the Seoul High Court decision, Lee & Ko again represented the SK affiliates before the Supreme Court of Korea. In March 2016, the Supreme Court affirmed the High Court’s decision.
The KFTC’s decision threatened SK Group’s business operations, as SK C&C’s business model essentially relied on its IT outsourcing contracts with affiliates. If the decision was not overturned, SK C&C would have had to completely and fundamentally change its entire business model. The potential business cost of such an adjustment was estimated at USD 2 billion. Coupled with the administrative fines levied against the seven SK Group affiliates by the KFTC, this was an extremely high-risk matter for SK Group.
Since other Korean conglomerates engage in similar intergroup business operations for IT outsourcing, this case garnered significant public attention, as an unfavorable outcome would have necessitated whole-scale changes in the business structures of other Korean conglomerates as well.