HS Ad disclosed the scale of its internal transaction with LG, but the gap between the actual transaction amount and the estimate reached as much as 87%, causing criticism for creating confusion among stakeholders.
According to the Korea Exchange on the 23rd, HS Ad announced on November 21 of last year its transaction of products and services with LG for the year 2025. At that time, HS Ad estimated its first-quarter sales from LG at 13.4 billion won, which accounted for 6.38% of the previous business year's sales. Subsequently, the estimated transaction amounts were 6.3 billion won for the second quarter, 8.2 billion won for the third quarter, and 17.4 billion won for the fourth quarter, bringing the annual estimated total to 45.3 billion won.
However, the actual first-quarter sales received by HS Ad from LG was only 5.8 billion won, which is 57% less than the disclosed amount. Even if the report on 'transactions of products and services with companies in the same group' prepared by the Fair Trade Commission was based on estimates, the size of the discrepancy is excessive. In fact, the Fair Trade Commission only issues a change notice if the disclosed transaction amount changes by more than 20%.
HS Ad also issued a change notice for its 2024 product and service transactions. In November 2023, HS Ad announced the details of its 2024 supply contract, which also estimated fourth-quarter sales at 31.5 billion won, but the actual transaction amount was only 4.2 billion won. This is 87% less than the estimated figure. HS Ad noted regarding the gap rate, "It varies because we cannot grasp the annual budget of the advertisers' corporations, and we have to get approval from the Fair Trade Commission."
Samsung's advertising planning affiliate Cheil Worldwide also experienced a significant gap between estimated sales and actual execution amounts. Cheil Worldwide had announced that a transaction worth 4.8 billion won would take place with Samsung C&T in the first quarter of 2023, but the actual execution amount was only 300 million won. In the second quarter, it expected a transaction worth 4.7 billion won, but only executed 300 million won.
The problem is that such discrepancies can lead to confusion among stakeholders. If the sales are publicly disclosed as large amounts but are actually executed at lower levels, it cannot escape criticism for having conducted 'inflated disclosures.' Especially in the case of HS Ad, the estimated sales for the first quarter of 2025 are significant at 6.38% of the previous business year's sales, leading to calls for more accurate information.
A Fair Trade Commission official stated, "This disclosure was created to enable investors and civic groups to watch over the internal transactions based on the public disclosure," and added, "We operate the change public disclosure criteria because we believe there is a need to inform the market if a discrepancy of more than 20% occurs."
However, some argue that the decrease in internal transactions itself can be viewed positively. A business professor noted, "While a large discrepancy in disclosed amounts can be confusing for the market, the reduction in internal transaction amounts among affiliates is a positive sign."