[Exclusive] Fair Trade Commission Sends Review Report to Lotte Chilsung... "Unfair Support by the Controlling Family"

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[Sejong=Asia Economy Reporter Joo Sang-don] The Fair Trade Commission (FTC) has concluded that Lotte affiliates unfairly supported Chairman Shin Dong-bin's family.

The FTC Secretariat confirmed on the 31st that it sent a review report containing these details to Lotte Chilsung. The review report corresponds to the prosecution's indictment.

Earlier, in March last year, the FTC conducted an on-site investigation targeting Lotte Chilsung's liquor business division. This was to verify suspicions that Lotte Chilsung benefited the chairman's family by selling wine through MJA Wine, a subsidiary of Lotte Holdings. The investigation also included allegations that Lotte Chilsung unfairly allocated work to MJA Wine. The dispatch of this report can be seen as the FTC acknowledging all these allegations.

MJA Wine was originally a wholly owned subsidiary of Lotte Chilsung. However, in October 2017, Lotte Holdings acquired 100% of its shares. During the ongoing FTC investigation in August this year, Lotte Holdings sold 100% of MJA Wine's shares back to Lotte Chilsung. The FTC judged that since Lotte Aluminum, the largest shareholder of Lotte Holdings, along with Chairman Shin and related parties, held a 62.7% stake as of March 2017 (based on the electronic disclosure system), they obtained unfair profits through affiliates.

Additionally, the FTC views that Lotte Chilsung unfairly allocated work to MJA Wine. The Fair Trade Act regards providing business opportunities that yield considerable benefits and conducting transactions on a significant scale without reasonable consideration of business capabilities or transaction conditions, or comparison with other businesses, as unfair internal transactions. However, even internal transactions between affiliates can avoid sanctions if they are unavoidable to achieve purposes such as efficiency, security, or urgency. In this case, the FTC judged that these conditions were not met.

Regarding this, a Lotte Chilsung official stated, "We have sincerely cooperated with the FTC investigation so far," and added, "We intend to fully explain our position going forward."

This is not the first time the FTC has targeted Lotte. Earlier on the 2nd, the FTC imposed a corrective order and a fine of 1 billion KRW on Lotte Hi-Mart for violating the Large-scale Distribution Business Act. Prior to that, in January this year, Lotte Shopping was fined 40.8 billion KRW for Lotte Mart's violation of the same act. Including these, Lotte has been fined a total of 60.6 billion KRW this year alone.

The FTC typically sends the review report, receives the respondent's written opinion, and then determines the final illegality and sanction level through a plenary session.

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