Police Investigate Lotte Mart for Breach of Trust after Lotte Gave 3 Billion Won to a Company for the "Pork Belly Gapjil"

[경향신문]

Lotte Mart / Yonhap News

The police are investigating Lotte Mart for possible breach of trust, after the major supermarket chain gave 3 billion won as compensation to a company that suffered from gapjil, a Korean term for abusive behavior or attitude against a weaker party in a power relationship.

According to the Kyunghyang Shinmun coverage on December 27, the Songpa Police Station in Seoul has been investigating Lotte Mart for suspicions of breach of trust since the case was transferred from the Yeongdeungpo Police Station on November 30. An investigation team at the Yeongdeungpo Police Station believed that the fact that Lotte Mart first gave 3 billion won as compensation to Sinhwa, a meat processing company, at the end of October without an approval from a general meeting of Lotte Group shareholders was a breach of trust that forced the company to suffer losses and handed their investigation results to the Songpa Police Station.

Yun Hyeong-cheol, who runs Sinhwa, argued that Lotte Mart forced him to pay marketing and consulting fees in 2015, triggering the so-called “pork belly gapjil” controversy. The Korea Fair Trade Mediation Agency decided that Lotte Mart should pay compensation of 4.8 billion won, about half the estimated losses, but the supermarket chain refused. The Fair Trade Commission then conducted due diligence for four years and imposed a fine of 40.8 billion won on Lotte Mart at the end of 2019.

Lotte Mart filed an administrative case against the Fair Trade Commission’s decision, and Sinhwa also filed a claim for compensation amounting to 19.8 billion won against Lotte Mart. As the conflict continued, Democratic Party of Korea lawmaker Kim Kyung-man, who formerly worked at the KBIZ Korea Federation of SMEs and who entered the National Assembly through proportional representation, requested Shin Dong-bin, chairman of Lotte Group, to appear in a parliamentary inspection last October and mediated between the two parties to reach an agreement. Later, it was known that Lotte Mart had decided to first pay Sinhwa compensation of 3 billion won. Lotte was to pay the additional amount, when the final compensation was determined in a civil case. The Lotte Group chairman did not appear before the National Assembly.

Early in November, the Seoul Southern District Prosecutors’ Office received a report against Lotte Mart from a civic group promoting measures to improve the livelihood of working-class citizens and sent the case to the Yeongdeungpo Police Station. The Songpa Police Station, which has jurisdiction over the Lotte Mart head office, received the case on November 30. The civic group also reported lawmaker Kim, who mediated between Lotte Mart and Sinhwa, for obstruction of affairs. A representative of Lotte Mart said, “If the court rules against Sinhwa or orders a fine less than 3 billion won, they are to return the difference, so the company will not suffer any losses.”