Lotte’s skeletons lead to FTC fineThe Fair Trade Commission fined Lotte Group 640 million won ($562,000) yesterday for unfairly supporting a teetering affiliate in the process of purchasing ATM machines.
Lotte dismissed the accusations, adding that as far as it was concerned, the issue had been cleared up last year.
According to the anti-trust agency, Lotte PS Net, an affiliate of Lotte Group that specializes in managing ATMs, bought the machines through a struggling Lotte affiliate, Lotte Aluminum, between September 2009 and last month, instead of directly purchasing from the manufacturer NeoICP.
Allegedly on instruction from Lotte Group Chairman Shin Dong-bin, who at the time was a vice chairman, Lotte Aluminum bought a total of 3,534 ATMs worth 66.6 billion won over a three-year period. It is then believed to have sold them to Lotte PS Net for 70.7 billion won, giving the former company a 4.1 billion won profit.
The anti-trust agency said it has been a long practice among conglomerates to unfairly support their affiliates by adding an unnecessary extra step to what should be simple transactions.
In 2008, Lotte Engineering and Machinery, which was reborn as Lotte Aluminum in 2009 after it sold its building units to Lotte Construction, was suffering from enormous debt. At the time, its debt-to-equity ratio exceeded 5,300 percent.
The FTC said the evidence of the command issued by Shin was spotted in e-mails exchanged between an executive at Lotte PS Net, an employee at Lotte Engineering and Machinery, and another executive at NeoICP.
Established in 2006, Lotte PS earned 26 billion won in revenue last year, up from 15.7 billion won in 2010.
Lotte PS Net said the situation was resolved last June when prosecutors failed to find any incriminating evidence.
By Lee Ho-jeong [firstname.lastname@example.org]