Lotte Hi-Mart Reaches Conclusion to Cancel Corrective Order Against Fair Trade Commission

Temporary Staff Forced to Sell Competitor's Products
Correction Order and 1 Billion KRW Fine Imposed
Appeal Against Sanctions... Lawsuit Filed in February 2021

South Korea's top home appliance retailer Lotte Hi-Mart is set to receive the court's first ruling on December 12 regarding its lawsuit challenging the Fair Trade Commission's sanctions as unfair. This trial could potentially change the business practices of the home appliance retail industry, with not only Lotte Hi-Mart but the entire sector closely watching the outcome.

The exterior view of Lotte Hi-Mart headquarters located in Daechi-dong, Gangnam-gu, Seoul.
[Photo by Lotte Hi-Mart]

Legal Battle Concludes After 2 Years and 6 Months

According to industry sources on the 10th, the Seoul High Court Administrative Division 6-2 (Presiding Judge Hong Seong-wook) will hold a verdict session on the 12th for Lotte Hi-Mart’s lawsuit seeking cancellation of the corrective order filed against the Fair Trade Commission chairman. The lawsuit was filed in February 2021. Since then, the court has held six hearings to gather opinions from both sides and conduct deliberations. The verdict on this day will mark the conclusion of the legal battle between Lotte Hi-Mart and the Fair Trade Commission that has lasted for about two and a half years.

Previously, in December 2020, the Fair Trade Commission imposed a corrective order and a fine of 1 billion KRW on Lotte Hi-Mart, finding that its practice of having dispatched workers sell products from other companies violated the Large-scale Distribution Business Act. It was revealed that dispatched employees sold other companies’ products worth as much as 5.5 trillion KRW, including Cuchen employees selling Cuckoo, Samsung, and LG products.

Lotte Hi-Mart opposed the Fair Trade Commission’s sanctions by filing a lawsuit to cancel the corrective order and applying for a suspension of execution. The court accepted the suspension application, which is similar to a civil provisional injunction, in March 2021. However, the Fair Trade Commission appealed this decision, causing some delay until the final ruling. In July of the same year, the Supreme Court dismissed the Fair Trade Commission’s appeal without a hearing (a decision rejecting the appeal without separate judgment), ending the matter. As a result, the effect of the corrective order has been temporarily suspended until the main lawsuit verdict.

Business Model Changes Inevitable Depending on Outcome

If the court rules in favor of the Fair Trade Commission in the main lawsuit, significant changes in the business methods and employment forms of Lotte Hi-Mart and other home appliance retailers are expected. Each dispatched employee would have to sell only products from their own company, or the companies would need to significantly increase the number of directly employed staff. Until now, Lotte Hi-Mart and others have maintained their previous business practices due to the court’s acceptance of the suspension of execution despite the Fair Trade Commission’s corrective order.

From the perspective of Lotte Hi-Mart and other home appliance retailers, the trial outcome could also worsen their profit structures. Recently, the industry has been experiencing deteriorating performance and expanding operating losses due to the global economic downturn and decreased real income. If they are forced to increase direct employment, the burden on companies will inevitably grow. An industry insider said, "Lotte Hi-Mart has been continuously closing underperforming stores and reducing staff due to recent poor performance. Given the internal and external environment, it will not be easy to bear the costs of direct employment."

The effect of the Fair Trade Commission’s corrective order will take immediate effect depending on the main lawsuit’s result. However, if Lotte Hi-Mart or the Fair Trade Commission files an appeal and applies for a suspension of execution, the effect may be temporarily halted. The Supreme Court must accept the suspension application, and in that case, the effect of the corrective order will be suspended until the appellate court’s ruling.

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