Lotte receives a record fine for unfairly shifting costs

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Lotte receives a record fine for unfairly shifting costs

Lotte Mart has been fined 41.2 billion won ($35 million) for shifting marketing expenses to pork suppliers.

The fine, imposed by the Fair Trade Commission (FTC), is the largest ever for a local retailer and came with some harsh words from the regulator.

According to the FTC on Wednesday, Lotte Mart charged five pork suppliers marketing expenses not agreed to under the contracts they had signed. The retailer held special pork discount events and passed the costs along to the suppliers. It also required the suppliers to cut meat themselves without compensating them for the cost of this processing.

Lotte Mart did not pay for the work by 2,782 supplier employees stationed at its branches, including those involved in management, sales and packaging. These labor costs were all paid by the suppliers.

The retailer also passed on consulting fees to the pork suppliers.

“We have found that [Lotte Mart] has used its major purchasing power in the local retail industry to commit numerous gapjil [abuse of power] against its suppliers,” said Kwon Soon-kook, head of the FTC’s distribution division. “We will look into whether other major retailers have committed similar acts.”

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