The Korea Fair Trade Commission imposed a penalty surcharge of 17.13 billion won and corrective orders on HDC Holdings Co. and HDC I'Park Mall (I'Park Mall) on the 8th for allegedly providing funds to an affiliate, I'Park Mall, through unfair means. The Korea Fair Trade Commission (FTC) also plans to file a complaint with prosecutors against HDC Holdings Co..
According to the Korea Fair Trade Commission (FTC)'s investigation, in Mar. 2006 HDC Holdings Co. signed a contract to lease some stores at I'Park Mall, which operates a mixed-use shopping mall at Yongsan Station in Seoul. The deposit under this contract was 36 billion won. At the time, I'Park Mall's store occupancy rate was below 70%, and it was posting a net loss of 21.5 billion won, yet it received a deposit of more than 30 billion won from HDC Holdings Co..
When HDC Holdings Co. signed the lease agreement with I'Park Mall, it delegated store operation and management to I'Park Mall. It also signed a separate "operation and management delegation agreement" under which HDC Holdings Co. would receive a portion of the revenue generated from store operations. In other words, if HDC Holdings Co. paid I'Park Mall a lease deposit and rent, I'Park Mall would pay HDC Holdings Co. a delegation fee and a portion of store operating revenue. Lee Sun-mi, a standing commissioner at the Korea Fair Trade Commission (FTC), said, "It is as if HDC Holdings Co. lent funds under the name of a lease deposit and I'Park Mall provided interest under the name of operating revenue."
From Mar. 2006 to Jun. 2020, the usage revenue I'Park Mall paid to HDC Holdings Co. averaged 105 million won per year. Converted to an interest rate, that is an annual average of 0.3%. Through this contract, I'Park Mall is estimated to have saved 45.8 billion won in interest. In response, the Korea Fair Trade Commission (FTC) applied a violation of Article 45(2) of the Monopoly Regulation and Fair Trade Act, which prohibits unfair support to affiliates. The penalty surcharge was set at 10% of the average sales over the past three business years, the maximum the Korea Fair Trade Commission (FTC) can impose for unfair support. However, because HDC Holdings Co. cooperated during the investigation, it received a 10% reduction.
Meanwhile, in 2018 the National Tax Service also viewed the HDC Holdings Co.–I'Park Mall transaction as indirect lending and imposed an additional 4.3 billion won. HDC Holdings Co. challenged this and filed a lawsuit, but lost at the Supreme Court in Feb. last year.
Regarding this, HDC Holdings Co. said, "We signed the lease agreement to achieve mutual benefit with store unit purchasers who were struggling with vacancies at the time."