Court: Lotte deserves fine for unfair practice

By Lee Kyung-min

A court has rejected a request from Lotte Shopping to nullify a fine the Fair Trade Commission (FTC) imposed on the firm for abusing its subcontractors.

Lotte Shopping, the operator of Lotte Department Store, was previously ordered by the antitrust watchdog to pay 4.5 billion-won ($4 million) in fines for abusing its dominant market status from January to May of 2012. However, the firm filed a suit in April to protest the fine.

The Seoul High Court ruled Monday that Lotte Shopping should pay the fine, saying the firm’s unfair business practice did harm to small businesses and hampered fair competition.

“Lotte Department Store asked its 35 subcontractors to submit sales reports to compare sales figures from Lotte and other department stores. Upon detecting the suppliers’ better sales figures made from other department stores, Lotte forced them to undersell goods and work extra hours, and ordered them not to have the same promotional events at other department stores,” the court said.

“When either of those demands were not met, or the suppliers failed to meet the quota allocated for them, Lotte imposed penalties by replacing shop managers, relocating the shops or threatening to remove the shop altogether,” the judge added.

The judge also said Lotte was not exemplary as the leading market player.

“Large companies such as Lotte affect how other major department stores plan and manage business practices. Being unfair destroys the whole ecosystem, fundamentally threatening the spirit of fair competition,” the judge said.

Initially, Lotte claimed the fine was too heavy, adding that any advice or warning from the FTC would have been good enough to rectify the unfair practice.

However, the judge said, “Evidence showed that Lotte had imposed penalties on its suppliers multiple times, rendering them to feel helpless. Other than paying a substantial fine, its practice would not have stopped,” the judge said.

Lotte also claimed that asking the suppliers to submit sales reports was not a company decision, rather a personal favor between workers in the same industry.

Dismissing the claim, the court said the suppliers were not considered equals with Lotte.

“Unlike Lotte’s claim, the purpose of asking for the sales reports was to generate more profit. Evidence showed that Lotte evaluated the suppliers based on the comparative performance at other major department stores. It was a decision and evaluation made for the company, not for the workers as individuals,” the judge said.

“Lotte’s practice deserves punishment as its unfair activities will ultimately infringe on consumer rights to purchase fairly traded goods and services,” the judge added.