HDC has strongly objected to the Fair Trade Commission's sanctions for unfair support practices, signaling it will file an administrative lawsuit.
In a statement released Thursday regarding the FTC sanctions, HDC said, "We signed lease and management contracts under the same terms as commercial unit buyers who were struggling with vacancies at the time, for their survival and mutual benefit." The company added, "The claim that we disguised a loan as a lease transaction using deposit payments does not reflect the facts."
HDC explained that Yongsan Private Investment Station was facing closure due to massive vacancies at the time, and approximately 3,000 commercial unit buyers who were on the verge of financial ruin from investment losses strongly demanded contract signing, requesting management fee exemptions and consignment operation of commercial spaces. The company also emphasized its responsibility for commercial facility operations under the project agreement with Korail, the project operator.
HDC also refuted the FTC's judgment that it disrupted fair trade order in the shopping complex market. "Private investment stations are station development projects under the Railroad Business Act, structured to cover project costs through rental income over 30 years, so they were never a competitive market with free entry and exit from the beginning," the company said. "The claim that we blocked other operators from entering does not match the facts."
HDC added, "It is difficult to accept the decision that our efforts to rescue the situation were improper when thousands of billions of won in damages would have been inevitable if the spaces had been left vacant." The company said it would "prove through legal proceedings that these were normal and legitimate actions."
The FTC concluded at its plenary meeting Thursday that HDC had effectively provided 36 billion won in free support to its affiliate HDC I'Park Mall since 2006 by disguising it as lease transactions. The commission resolved to impose provisional penalties totaling 17.13 billion won — 5.76 billion won on HDC and 11.368 billion won on HDC I'Park Mall. HDC as a corporation has been referred to prosecutors.
According to the FTC, HDC I'Park Mall used approximately 36 billion won from 2006 to 2020 while paying usage fees averaging only 105 million won annually, equivalent to approximately 0.3 percent per year. The FTC estimates the total interest savings compared to normal market rates during this period amounted to 45.8 billion won.