Umi Group and mid-sized construction company Umi Construction, which funneled approximately 500 billion won worth of apartment construction projects to affiliates with no track record in order to meet first-priority bidding qualifications for public land, will face sanctions from the Fair Trade Commission.
Companies that received support even included a non-affiliated corporation wholly owned by the second-generation heirs, who disposed of their shares in this non-affiliated company with 11.7 billion won in stock sale profits in just 5 years.
Notably, the fine amount of approximately 50 billion won represents the second-largest fine ever imposed on a construction company.
The Fair Trade Commission announced on Nov. 17 that it would impose corrective orders and a fine of 48.379 billion won on corporate group Umi Group, and criminally report core affiliate Umi Construction. This sanction represents a case where the commission cracked down on unfair support practices that artificially created bidding qualifications for specific affiliates by lending construction track records to companies without substantial capabilities. This fine amount for a construction company ranks as the second-largest in history, following Hoban Construction (60.8 billion won). However, Hoban Construction filed a lawsuit against the Fair Trade Commission in September 2023 to cancel the fine payment and received a partial cancellation ruling.
In calculating the fine, the Fair Trade Commission considered the difficulty of determining normal prices and imposed the fine based on enforcement decree standards, treating 10% of the support amount as the violation amount. No mitigation was applied. Regarding why Umi Construction was specifically targeted for criminal reporting, Choi Jang-gwan, director of the commission’s Corporate Group Surveillance Bureau, stated, “Umi Construction essentially performed the functions of the group headquarters and was the core corporation that planned and directed the entire track record funneling structure.”
The commission had previously dispatched investigators to Umi Construction in February 2024, launching a full-scale investigation. The commission suspected Umi Construction of providing unfair support while selling public land to affiliates through “swarm bidding.” According to the commission’s investigation, Umi Group created track records by inserting affiliates with no track record as non-lead construction companies at 12 apartment construction sites owned by project companies (Umi Construction, Umi Development, Umi Global, etc.) starting from 2017. According to the commission, Umi Group’s total support amount reached 499.7 billion won.
According to the Fair Trade Commission, Umi Group had continuously conducted swarm bidding using multiple affiliates since 2010. However, the situation changed when Korea Land & Housing Corp. (LH) significantly strengthened first-priority requirements in 2016 to prevent swarm bidding amid intense social criticism. The system was revised so that companies without 300 units of housing construction track record could not bid as first-priority bidders.
Under these circumstances, the Fair Trade Commission concluded that Umi Group funneled construction projects worth 50 billion won to affiliates without housing construction track record starting from 2017, with the purpose of continuing to participate in bidding under the changed system. Furthermore, the investigation revealed that swarm bidding was conducted according to group headquarters directives.
Some companies were even selected as construction companies without having construction business licenses. The five companies selected as support recipients—Umi Estate, Myeongga Industrial Development, Simwoo General Construction, Myeongsang Construction, and Daan Construction—were essentially paper companies with virtually no sales or housing construction experience at the time. Particularly, since these companies lacked actual construction capabilities, Umi Group essentially conducted systematic assembly by having other affiliates handle paid-in capital increases, technician transfers, site personnel, process management, and contract preparation to help them meet building license requirements. As a result, these five companies, which had virtually no sales before support, all emerged as mid-sized construction companies with annual sales exceeding 50 billion won after receiving support. The Fair Trade Commission judged this as conduct that seriously distorted market order with competing businesses.
A particularly notable case is Umi Estate, which is 100% owned by the second-generation heir. Established in 2017 with 1 billion won in capital, this company was assigned an 88 billion won construction project just four months after establishment, and based on this, won an additional public land plot in 2020. Subsequently, the two second-generation heirs sold their shares to Umi Development for 12.7 billion won in 2022, realizing 11.7 billion won in profits within five years. The Fair Trade Commission specified this as an unfair transfer of wealth to specially related persons. Director Choi stated, “We expect the eradication of conduct that artificially provides public land bidding qualifications to affiliates for the purpose of participating in expedient swarm bidding.”
Additionally, while recent swarm bidding cases sanctioned by the Fair Trade Commission involving Hoban, Jeil, Junheung, and Daebang mostly involved companies owned by the founding family, this case is characterized by large-scale support being provided to affiliates without special relationships beyond the second-generation heir’s company. The Fair Trade Commission announced it will continue to monitor private benefit extraction and unfair support practices in the housing construction and public land markets.
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