[서울신문] Lotte Chilsung saved by unfair support from affiliates in the’withdrawal crisis’… FTC, prosecution charges

Fair Trade Commission sanctions Lotte Chilsung Beverage
Unfair support for subsidiaries that were completely incapacitated
The winer supplies… The burden of sales promotion staff
Fair Trade Commission “Providing about 3.5 billion won in economic profit”

Lotte Chilsung Beverage, which harmed natural market competition by utilizing its subsidiary, which was in danger of being retired, was charged with a fine of over 1 billion won and prosecution.

The Fair Trade Commission announced on the 6th that Lotte Chilsung has decided to impose a correction order and a fine of 1.1 billion won for the unfair support of MJA wine, which runs a wine retail business at a department store, and to prosecute the Lotte Chilsung corporation to the prosecution. The scale of the detailed penalty is 770 million won for Lotte Chilsung and 475 million won for MJA.

Founded in 2008 to sell wine through department store channels, MJA Wines continued to deteriorate enough to fall into total capital erosion in 2009, a year after its inception, and into total capital erosion in 2013. However, Lotte Chilsung, which owns 100% of MJA Wines, has implemented unfair support activities to maintain the department store sales channel.

First of all, Lotte Chilsung established annual MJA cost rate targets after 2012, and set the discount rate for MJA higher than those of other customers in order to achieve that target. As a result, the MJA cost rate improved from about 77.7% in 2012 to about 66% in 2019. In addition, MJA’s gross profit (sales-cost of sales) also jumped about 3.5 times from 1,123 million won in 2012 to 5,097 billion won in 2019 due to the increase in sales.

Also, since September 2009, Lotte Chilsung has paid for promotional staff expenses necessary for MJA’s wine sales. In July 2012, it was pointed out as’unfair support for subsidiaries’ in its own internal audit, but Lotte Chilsung continued to bear the burden until December 2017. In addition, Lotte Chilsung has its employees in charge of key tasks, such as planning and sales activities related to MJA’s wine retail business, and did not receive compensation from MJA.

The Fair Trade Commission determined that an excessive economic profit of about 3.5 billion won over 10 years was provided through a series of unfair support activities. An official from the FTC said, “If there was no support from Lotte Chilsung, it was highly probable that MJA could not escape from the state of capital erosion in 2009 and was naturally expelled from the market.” “We were able to settle in the market by increasing the number of our stores,” he said.

Reporter Sejong Na Sang-hyun [email protected]