Lotte Shopping (023530) faces regulatory sanctions after an investigation revealed the company engaged in abusive practices against suppliers while operating Lotte Mart.
The Fair Trade Commission announced on the 15th that it has decided to impose corrective orders and a fine of 569 million won ($400,000) on Lotte Shopping for violations of the Large-Scale Distribution Business Act.
According to the FTC, Lotte Shopping failed to immediately provide signed and sealed contracts specifying transaction types, product categories, and contract periods when entering into 101 contracts with 97 suppliers between January 13, 2021 and February 23, 2024. The company also paid for goods up to 386 days past the legal payment deadline while failing to pay approximately 34 million won in overdue interest.
An FTC official stated, "Large-scale distributors must pay overdue interest when they pay suppliers late. They cannot fail to fulfill or delay payment obligations simply because the payable amount has been provisionally seized by creditors. They can fulfill their payment obligations by depositing the funds with the court."
Lotte Shopping also violated the law when returning 19,853 items worth 220 million won that it had purchased through direct buying transactions. Large-scale distributors are prohibited in principle from returning goods received from suppliers without justifiable cause, yet the company carried out returns without objective supporting documentation. Additionally, Lotte Shopping forced six suppliers to dispatch employees to work at Lotte Mart stores for up to 50 days before concluding employee dispatch agreements.
An FTC official said, "This action involves multiple violations of prohibited practices under the Large-Scale Distribution Business Act, including returning directly purchased goods without justifiable cause and using supplier employees. This will serve as a warning against unfair practices by large-scale distributors."
