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The Economic Impact of Covid Bolsters Samsung’s Legal Position

This briefing comes from Korea View, a weekly newsletter published by the Korea Economic Institute. Korea View aims to cover developments that reveal trends on the Korean Peninsula but receive little attention in the United States. If you would like to sign up, please find the online form here.

What Happened

  • Samsung’s vice chairman Lee Jae-Yong was indicted on charges of engaging in stock price manipulation, unfair trading and other illegal means to tighten his control over the country’s biggest conglomerate.
  • However, the court did not issue an arrest warrant, raising doubts on the strength of the prosecution’s case.
  • This coincides with Bank of Korea’s recent announcement that the economic decline in 2020 may be deeper than the previously expected contraction. It also lowered growth projections for 2021.

Implications: Adverse economic conditions created by the pandemic may prevent the Korean government from disciplining the country’s conglomerates. Although Samsung has been on the defense since revelations of its involvement in ex-President Park Geun-hye’s influence-peddling scandal, the company has leveraged the economic uncertainty to renew the argument that harm to the company could damage the national economy. More broadly, the COVID-induced recession has allowed conglomerates to justify layoffs without consultation with labor unions.

Context: The belief that disciplining conglomerates could negatively impact the national economy is widely circulated. In response, the Korean government has been highlighting the role of small and medium enterprises (SMEs) in the development and export of testing kits in the ongoing global health crisis. By presenting SMEs as competitive actors on the global market, the government may look to disarm the common argument that companies like Samsung are too important to face legal consequences for its behavior.

Korea View was edited by Yong Kwon with the help of Sophie Joo, Sonia Kim, and Chris Lee.

From the flickr account of juan nuñez parilli

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