Lotte Mart, South Korea’s No. 2 discount chain, is under investigation for allegations of unfairly pressuring a supplier into selling pork bellies below production cost, Korea’s antitrust watchdog said Tuesday.
A source at the Fair Trade Commission (FTC) said investigators have been checking the retailer since December after a local pork producer raised complaints that Lotte Mart not only forced suppliers to sell at below the cost of production, but insisted on covering shipment and credit card payment-related expenses.
Lotte Mart has been engaged in a so-called ‘pork belly day’ sales promotional event for some time that boosted demand for the meat cut.
“A supplier claimed that Lotte’s unfair demands resulted in US$8.3 million in damages since it had to sell the meat at 30-50 per cent discounts,” the official said.
In August, Lotte Mart contested a ruling by the Korea Fair Trade Mediation Agency (Kofair) that called on the discount store to pay $3.96 million to the supplier.
Under existing rules, if a company rejects Kofair’s verdict, the matter has to be forwarded to the FTC.
Lotte Mart argued that while it did cut prices during the promotional event, it immediately marked up prices to reimburse suppliers for any losses incurred.
“Kofair only accepted the allegations raised by the supplier when it ruled on the size of the fine,” a Lotte Mart spokesperson said. “The company will provide all information being requested by the FTC and cooperate fully with the probe.”
Market watchers said that even if the corporate regulator rules against Lotte Mart, the suppliers will still have to engage in a court battle to get compensation.