HYBE, the K-pop agency responsible for global sensations like BTS and NewJeans, is inching closer to a regulatory crossroads. The company and its 16 affiliates had a combined asset value of 5.37 trillion KRW at the end of June. If this figure remains above the 5 trillion KRW ($3.7 billion) mark by the end of the year, HYBE will find itself under the purview of South Korea’s Monopoly Regulation and Fair Trade Act (MRFTA).
The MRFTA, enacted in 1980 and overseen by the Korea Fair Trade Commission (KFTC), was designed to foster a competitive market landscape. It does so by curbing monopolistic behaviors and ensuring that businesses operate transparently. One of its pivotal provisions requires large conglomerates, colloquially known as chaebols in South Korea, to provide detailed financial and operational disclosures if their assets breach certain thresholds, such as the 5 trillion KRW benchmark. This transparency is crucial. It offers both the KFTC and the general public a clear view of the operations of these business giants.
Each year, the Fair Trade Commission releases a watchlist of companies subject to these mandatory disclosures. The criteria are based on their financial statements and share ratios at the year’s end. If HYBE’s assets surpass the 5 trillion KRW threshold by the end of 2021, it will be subjected to regulations typically reserved for much larger corporations. This would be a first for a K-pop agency. Among the potential implications are mandatory disclosures on internal trading and regulations against the unfair channeling of business profits.
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HYBE is one of many in this situation
Significant financial growth has marked HYBE’s journey to this potential regulatory juncture. From the end of the previous year to June, the company’s assets swelled by 11.5%, reaching 3.98 trillion KRW. When considering the assets of its subsidiaries, such as BigHit Music, Pledis Entertainment, and Weverse Company, the combined total comfortably exceeds the 5 trillion KRW mark.
HYBE is one of many companies navigating these regulatory waters. Hyundai Marine & Fire Insurance, an insurance subsidiary of the Hyundai conglomerate, is also approaching the disclosure threshold. On the flip side, companies like Iljin witnessed a decline in their assets. Iljin’s assets dropped by over 2 trillion KRW after selling several of its affiliates, including the notable sale of Iljin Materials to petrochemical titan Lotte Chemical.
The evolving financial landscapes of these companies underscore the dynamic nature of South Korea’s business environment, where rapid growth can bring both opportunities and regulatory challenges. – K-Pop News Writer
Featured Image: The exterior of HYBE’s building in Yeongsan, Seoul. Source: Yonhap News Agency.
