Financial authorities on Wednesday ruled out Big Tech firms Naver and Kakao as subjects to one of the “three fair economy bills,” designed to rein in dominance of conglomerates and add transparency to corporate governance here.

“At the moment, Kakao and Naver do not meet the standards,” Financial Services Commission Vice Chairman Doh Kyu-sang said in a briefing of related ministries for the revised bills.

Companies with two or more financial units and total assets of over 5 trillion won ($4.58 billion) are targeted by the bills passed by the National Assembly last week. At the moment, six powerhouses -- Samsung, Hyundai Motor Group, Hanwha, Mirae Asset, Kyobo and DB -- are confirmed as subjects of the revised bills.

The bills are quintessentially revisions to the Commercial Act, a revision to the Fair Trade Act and a bill on supervising business groups with financial units. Naver and Kakao were largely expected to be scrutinized by the bill on supervising firms with financial units.

The rationale by the regulator of excluding the two Big Tech companies is based on their assets that “do not meet the standards.“

Though Kakao manages two financial units – Kakao Bank and Kakao Pay Securities – with total assets of over 20 trillion won, the security unit’s assets remain merely around 100 billion won, Doh said, implying that the regulator regards Kakao as operating only a single financial unit for the moment.

Naver also has only one financial unit, focusing on its mobile payment services. Its total assets currently stand below 5 trillion won.

Onlookers expressed concerns over financial authorities’ decision on the possibility it may fuel some businesses’ opposition toward Big Tech firms, as they have claimed the government has been granting “too many favors” for tech firms.

On the revised bills, Korea Fair Trade Commission Chairperson Joh Sung-wook called them “a step forward from past chaebol reform policies,” in the same briefing.

“Due to the bills, the businesses’ expedient practices are likely to further disappear --- it would correct the balance of the nation’s economy and become a systematic platform for a fair and innovative market economy,” she added.

Through the revisions, stricter regulations on chaebol’s private profit-taking were implemented by expanding its subjects.

Previously, the subjects were only listed companies -- usually affiliates -- in which the largest shareholder and his or her family owned more than a 30 percent stake. Unlisted affiliates in which the shareholder owned more than 20 percent stake were subjects as well.

Now, all firms, both listed and unlisted, at which the largest shareholder owns more than a 20 percent stake, alongside subsidiaries with more than a 50 percent stake, are affected. This increases the number of such subjects nearly three times, to 598 from the previous 210.

The holding company must now own a 30 percent stake in listed subsidiaries, compared to the previous 20 percent. The rules will only be applied to subsidiaries that are launched from now on.

A key point of the revised bills would be requiring auditors to be selected from outside the corporate board for most companies, whereas the current law allows them to be picked from within. The voting power of the largest shareholders and their families in naming an auditor would be limited to 3 percent.

Businesses have expressed strong opposition to the revisions, saying it further rattles business plans amid coronavirus risks.

By Jung Min-kyung (mkjung@heraldcorp.com)