Back To Top

[Editorial] Shady conglomerate

Lotte should sincerely resolve public suspicions

A revelation from the Fair Trade Commission on Lotte Group is embarrassing the public again, following last year’s feud between the group founder’s two sons over taking the reins of the conglomerate.

A noteworthy point was that founder Shin Kyuk-ho and his friendly powers — including families and relatives — have effectively controlled the conglomerate with only a 2.4 percent stake for decades.

It was possible because of multiple layers of cross-shareholding, entangled with each other, according to the FTC. The antitrust regulator also said the group conducted negligent or fabricated reports to the Korean authority over its shareholding structure.

More seriously, affiliates in Japan were found to have owned key affiliates in Korea, such as Hotel Lotte and Lotte World. The Japanese units are controlled by Shin and his friendly powers.

The FTC report in effect verified market speculations that Lotte is not really a Korean business group, but one whose biggest shareholder is based in Japan.

Shin Dong-bin, the chairman of Lotte Group and second son of the founder, told reporters last year that “Lotte is a Korean enterprise.” He also reiterated the remarks during the National Assembly’s audit on the FTC.

The chairman should be held accountable for his remarks. He should make public the cash flows of operating profit in Korea generated among local units.

The situation is different from the second half of 2015, when he was reportedly placating Korean citizens on the then-mounting suspicions on Lotte’s corporate nationality. Irrespective of his ongoing management feud with his elder brother Shin Dong-ju, he has to clarify his stance over the FTC report and his former remarks.

While we have no will to stand by Shin Dong-ju, the former vice chairman of Lotte Holdings, the ousted brother’s remarks that “Lotte is a global enterprise” seems to be a rather frank position at the present stage.

Lotte has long been regarded as one of the nation’s 10 major business groups and has grabbed the fifth spot recently. Consumers’ steady spending over the past few decades on products from Lotte Confectionery and Lotte Department Store and some other units have been the backbone of its remarkable growth.

The group should scrap fishy interaffiliate stake holdings as soon as possible. If not, it may consumers’ dissatisfaction could manifest itself in boycotts once more at Lotte Mart outlets across the nation.

Law enforcement authorities should also look into whether low-key capital transfers were conducted in the group to evade tax.