FTC slaps Amorepacific with W96 million fine for unfair business practices

By Kim Hyun-bin

The country's top antitrust regulator has filed against the country's cosmetics giant Amorepacific Group for 96 million won ($77,800) over unfair business loan procedures.

According to the country's Fair Trade Commission (FTC), Amorepacific Group gave 75 billion won worth of fixed deposits without a fee to Cosvision, which enabled the affiliate to receive a low-interest loan from the Korea Development Bank (KDB).

The loan gave Cosvision an advantage in elevating its business status, which the government saw as an unfair business loan procedure between a conglomerate and its affiliate, and decided to fine the group 9.6 billion won, Monday.

From the fixed deposits obtained, Cosvision was able to receive five loans from KDB, worth a total 60 billion won with a 1.72 percent to 2.01 percent interest rate for a year, from August 2016 to August 2017, which is estimated to have created an economic gain worth 139 million won. Without the fixed deposits from the group, Cosvision would have had to pay 2.04 percent to 2.33 percent in interest.

Through the loan, Cosvision was able to enhance its production capacity by up to 50 percent and maintain its third-place footing in the domestic cosmetics original equipment and manufacturing (OEM) market as well as acquiring an unfair financial gain via the low interest rates, the FTC said.

Considering the economic gain from the low interest rate was not significant and most of the loaned money was used to construct a new production line, the regulator did not see it as a fraud case. However, the act was seen as a violation of the country's fair trade and monopoly regulation act, which led to 48 million won in fines each for Amorepacific and Cosvision.

“The fine could be seen as restraining measures against conglomerates and their unfair support to affiliates, which is aimed to strengthen their competitiveness,” an FTC official said. “We will heighten surveillance on unfair support measures by conglomerates and take strong action against violators.”

In 2011, Amorepacific Group incorporated Cosvision, a cosmetics maker, as its affiliate. Since then, all of Cosvision's products have been sold under the Amorepacific and Innisfree brand names.