hankyoreh

Graphic provided by jaewoogy.com

“Mr. Koo, we’re planning to get into the electronics business, too,” Samsung founder Lee Byung-chul told Goldstar (now LG Electronics) founder Koo In-hwoi over coffee one day in the late 1960s. Koo was so incensed by the remark that he walked out of the room, as Jeong Hyeok-jun recounts in his book “Fierce Struggle Between Rival Companies.”

Lee and Koo were related by marriage — in fact, they’d been classmates at Jisu Elementary School in Jinju, South Gyeongsang Province. Nevertheless, Samsung Electronics and LG Electronics would become rivals, unwilling to yield an inch to each other.

Until recently, the two companies continued to wrangle: violating patents, swiping technology and other trade secrets and smearing each other in their advertisements. It got so bad that the press compared their rivalry to a “war.”

2012 was the year when the LG-Samsung war burned the hottest. The indictment of 11 employees at Samsung for leaking OLED TV technology triggered an all-out brawl. Samsung ran an advertisement claiming that LG had misrepresented the capacity of its refrigerators. Soon injunctions were being filed to ban advertisements, and lawsuits demanding tens of billions of won in damages were being filed.

Next, the dispute bled over into OLED. Once again, the companies headed to the courts, filing lawsuits for damages and asking for injunctions against patent infringement.

If Samsung and LG were Korea’s traditional rivals, LG and SK have emerged as a new pair of rivals in the area of batteries, a growth industry for the future. On Feb. 10, the US International Trade Commission (ITC) ruled in favor of LG Chem, which had sued SK Innovation for stealing trade secrets about its batteries. US President Joe Biden has the final say, but he’s unlikely to overrule the ITC’s decision.

SK has two options. It could keep pursuing litigation by appealing the decision, or it could negotiate with LG to reach a settlement.

More litigation would prolong the dispute, creating more uncertainty and potentially driving away customers. But negotiating has a downside, too: SK would have to shoulder an exorbitant settlement.

The two companies are at odds about how much the settlement should be. SK has suggested a figure in the tens of billions of won, while LG wants something like 3 trillion won (US$2.71 billion).

LG stresses the fact that it has built up its key technology and trade secrets by investing tens of trillions of won and racking up losses of nearly 100 billion won (US$90.38 million) every year for the past decade.

SK has indicated that it’s willing to negotiate, but claims that LG’s ruinous demands would force it to terminate its battery business.

Some newspapers are pressuring the companies to quickly reach an understanding in consideration of the national interest. Prime Minister Chung Sye-kyun said much the same thing, asserting that the two companies’ squabble only benefits other countries.

That’s the nationalistic line typically taken whenever Koreans bicker with each other. But what it ignores is that the two companies are locked in a heated competition for dominance in the battery market of the future, just as LG and Samsung once vied for control over the electronics market.

When the LG-Samsung dispute was at its peak, the South Korean government made an effort to mediate between them. But their rapprochement didn’t last long, and soon they were in another tussle.

Given the Moon administration’s emphasis on a fair economy, this situation seems to call for a more fundamental approach. In order to prevent wasteful squabbling between companies, the first order of business is to institute legal and institutional reforms to establish a fair system of competition.

The fact that South Korean companies have turned to US regulators to settle their dispute reflects their lack of confidence that a case about stealing trade secrets could be quickly or fairly settled at home.

SK Chairman Chey Tae-won is a vocal proponent of “social responsibility.” He was recently named the next chairman of the Korea Chamber of Commerce and Industry, raising hopes that socially responsible management will be more widely adopted by the Korean business society.

The first step toward corporate social responsibility is obeying the law. That’s the principle to which SK must adhere in resolving its dispute with LG.

It’s said that negotiating is an art form. LG needs the wisdom to come to a modus vivendi with SK by finding the middle ground between financial gain (that is, compensation) and moral victory (that is, the acknowledgment that its trade secrets were stolen).

By Kwack Jung-soo, editorial writer

Please direct questions or comments to [english@hani.co.kr]