FTC fines CJ food distribution subsidiary $18 million for unfair practices

The Fair Trade Commission has fined CJ Freshway, a food distribution and catering subsidiary of CJ Group, 24.5 billion won for unfairly supporting an affiliate to squeeze the competition.

Yoo Seong-wook, director general of the business group monitoring bureau at the Fair Trade Commission (FTC), speaks during a press briefing on the regulator's decision to fine CJ Freshway on Tuesday at the watchdog's headquarters in Sejong. [YONHAP]

CJ Freshway, a food distribution and catering subsidiary of CJ Group, has been fined 24.5 billion won ($17.9 million) by Korea's antitrust regulator for unfairly supporting its affiliate to solidify its market dominance.

Since around 2010, CJ Freshway has established 11 Freshone branches nationwide jointly with small local merchants in an effort to make inroads into the local food distribution market while resolving their complaints and gradually increasing its shares in the affiliate, ultimately wholly owning it, according to the Fair Trade Commission (FTC).

From 2010 through June 2024, CJ Freshway allegedly put 221 officials in key management roles at Freshone and paid them 33.4 billion won combined for payroll costs instead of the affiliate.

"The business method CJ used was aimed at building an entry barrier to the industry for other competitors and avoiding conflicts with small distributors," an FTC official said.

"Instead of maintaining a win-win relationship, the company has expelled the small entities from the industry in a systemic fashion, and their due profits have been taken by the large conglomerate," he added.

In addition to the penalty, the FTC ordered the company to take corrective measures.

"The government will continue to monitor the market for potentially unfair practices by large companies and sternly deal with them to better protect small merchants and customers," the FTC said in a release.

CJ Freshway objected to the decision, saying that "the Freshone business is a joint operation with local food distributors based on mutual agreements," adding that the company "has not secured any market status significant enough to affect competition."

The company said it will urge for another deliberation through legal action.

BY SHIN HA-NEE, YONHAP [shin.hanee@joongang.co.kr]