"Lotte Must Respond Sincerely to Compensation Adjustment"

‘Samgyeopsal Gapjil’ Lotte and Yoon Hyung-cheol, CEO of Shinhwa Co., Appeal Ahead of Compensation Mediation

Yoon Hyung-chul, CEO of Shinwha Co., Ltd., a meat processing company

[Wanju=Asia Economy Honam Reporting Headquarters, Reporter Kim Han-ho] “I hope to come out of the long tunnel of the past seven years.”

Yoon Hyung-cheol, CEO of Shinhwa Co., Ltd., who has been fighting a difficult battle over the so-called ‘Samgyeopsal Gapjil Incident’ with Lotte Mart, expressed his complex and delicate feelings.

Although they have won administrative lawsuits in two trials and received continuous interest and support from the political sphere, it is uncertain whether Lotte will sincerely participate in the civil damage compensation mediation procedure to resume on October 5.

Moreover, Lotte once rejected the mediation amount that Shinhwa Co., Ltd. had conceded three times to avoid rehabilitation procedures, according to the Fair Trade Mediation Agency’s mediation in 2015.

Therefore, CEO Yoon feels ‘half hopeful and half worried’ about the civil damage compensation mediation procedure.

▲ Growing into a solid meat processing company, then falling into ruin due to Lotte’s ‘Gapjil’...

Shinhwa Co., Ltd., a meat processing company based in Bongdong-eup, Wanju-gun, wrote its own ‘myth’ as its name suggests.

Despite various difficulties, the executives and employees worked closely together.

As a result, it recorded sales of 60 billion KRW and grew into a solid company with as many as 146 employees.

The dark clouds over Shinhwa Co., Ltd., which was thriving, date back to 2012 when it signed a contract with Lotte Shopping (Lotte Mart).

From July 2012 to November 2015, Lotte forced Shinhwa and many other companies to supply products at prices lower than the market price under the pretext of promotional activities such as ‘pork sales price discount events.’

In addition, suppliers were made to work as mart employees. Consulting fees necessary for PPL product development were also passed on to the suppliers.

This was the infamous ‘Samgyeopsal Gapjil’ that continued like a carpet bombing.

During this period, Shinhwa Co., Ltd. suffered damages amounting to 10.93 billion KRW.

Unable to endure any longer, Shinhwa applied for mediation to the Fair Trade Mediation Agency in August 2015.

The agency confirmed Lotte Shopping’s unfairness and issued a mediation ruling ordering payment of 4.817 billion KRW.

This amount was also decided after Shinhwa conceded three times to avoid rehabilitation procedures.

Nevertheless, Lotte refused the mediation ruling.

Lotte’s ‘Gapjil’ behavior was immediately automatically reported to the Fair Trade Commission, which recognized Lotte’s unfair acts in January 2020 and imposed a fine of 40.823 billion KRW.

However, Lotte appealed, hired a major law firm, and filed a lawsuit at the Seoul High Court, but the High Court also ruled in favor of the Fair Trade Commission and Shinhwa this July.

Meanwhile, Shinhwa became devastated.

From a sound mid-sized local company, it entered bankruptcy and rehabilitation procedures in January 2016.

Sales dropped to 18 billion KRW, and the number of employees, which was over 140, is now only 16.

Factory view of Shinhwa Co., Ltd.

▲ Lotte appeals to the Supreme Court... Damage compensation lawsuit to proceed starting with mediation hearing on October 5

Lotte appealed to the Supreme Court, dissatisfied with the High Court’s ruling.

The Supreme Court assigned the presiding justice and panel on September 29 and began reviewing the grounds for appeal and legal issues on the 30th, entering into the hearing process.

Meanwhile, Shinhwa’s two damage compensation lawsuits against Lotte Shopping in 2017 and 2020 are also scheduled to resume starting with a mediation hearing on October 5.

The civil court has postponed the trial, stating it would observe the administrative lawsuits to determine Lotte’s illegality.

Whether the damage compensation lawsuit will be prolonged like the seven-year administrative lawsuit depends on the mediation procedure held on the 5th.

After hearing the opinions of Shinhwa and Lotte on that day, if no objection is raised within 14 days to the voluntary mediation decision, the compensation amount will be determined.

If either party refuses, the damage compensation lawsuit will inevitably continue as a protracted legal battle.

▲ Public opinion grows demanding “Lotte sincerely participate in the mediation procedure”

“Achieving a smooth mediation agreement is not only about compensating the victimized company but also aligns with improving Lotte’s corporate image.”

This is part of a statement released on the 29th by Rep. Sujin Lee (Democratic Party, Dongjak-gu Eul), who has stood with Shinhwa in fighting Lotte’s Gapjil.

In fact, if Lotte had accepted the Fair Trade Mediation Agency’s mediation in 2015, the matter would have ended with a mediation amount of 4.8 billion KRW instead of a fine of 40.8 billion KRW.

It became a case of ‘using a plow to stop what could have been stopped with a hoe.’

CEO Yoon believes that if Lotte had considered the position of the suppliers even a little, Shinhwa’s pain and suffering would not have been so great, and ‘large corporation Gapjil tyranny’ would not have become frequent.

CEO Yoon appealed, “Since Lotte has declared ESG management, it should understand that coexistence with small and medium enterprises is important in management,” adding, “The pain and suffering caused by various lawsuits are beyond expression, so I hope Lotte actively participates in the damage compensation mediation.”

He continued, “Shinhwa’s small but unique ‘myth’ was achieved thanks to the ‘small heroes,’ the executives and employees who devoted themselves to the company,” and said, “For those who are exhausted from the fight with Lotte, I hope October 5 will be the day to see the light of hope at the end of the long tunnel.”

Wanju=Honam Reporting Headquarters, Reporter Kim Han-ho stonepeak@asiae.co.kr

This content was produced with the assistance of AI translation services.