The Korea Fair Trade Commission imposed a 4.1 billion won penalty surcharge for unfair funding and personnel support at E-Land Group, but a ruling ordering the cancellation of 1.2 billion won of that amount has been finalized. The Supreme Court held that part of the conduct for which the Korea Fair Trade Commission (FTC) imposed a penalty surcharge did not constitute unfair support.
The Supreme Court's Second Division (presiding Justice Eom Sang-pil) said on Feb. 9 that it finalized a lower court ruling that canceled part of the penalty surcharge in a suit filed by E-Land Group's holding company E-Land World and its affiliate E-Land Retail seeking to overturn corrective orders issued by the Korea Fair Trade Commission (FTC) on Jan. 29.
In May 2022, the Korea Fair Trade Commission (FTC) issued corrective orders, saying E-Land Retail provided funding and personnel support to E-Land World in a devious manner. The penalty surcharge imposed by the FTC totaled 4.079 billion won, including 2.06 billion won on E-Land Retail and 2.019 billion won on E-Land World.
The Korea Fair Trade Commission (FTC) found that E-Land Retail unfairly supported E-Land World in three ways.
First, in Dec. 2016, E-Land Retail signed a contract to purchase land in Muan County, South Jeolla (25 billion won), and a warehouse in Bupyeong District, Incheon (42 billion won), owned by E-Land World, and paid 56 billion won as a deposit. Six months later, however, E-Land World terminated the contract by not paying the remaining 11 billion won, and E-Land World returned the deposit to E-Land Retail. At the time, there was no E-Land Retail board resolution, and the deposit was very high at about 84% of the asset value.
The Korea Fair Trade Commission (FTC) viewed this as E-Land Retail lending 56 billion won to E-Land World free of charge and conferring a benefit equivalent to 1.37 billion won in interest expense. At the time, E-Land World's credit situation was so poor that new borrowing was difficult.
Also, in July 2014, E-Land Retail transferred the clothing brand "SPAO" to E-Land World. It then allowed the transfer price of 51.1 billion won to be paid in 15 installments over nearly three years without charging any delinquency interest. The Korea Fair Trade Commission (FTC) regarded 3.5 billion won in delinquency interest as a benefit E-Land Retail provided to E-Land World.
Former E-Land Retail CEO Kim Yeon-bae concurrently served as E-Land World's CEO from Nov. 2013 to Mar. 2016. The Korea Fair Trade Commission (FTC) determined that during this period, E-Land Retail paid 185 million won in salary for the "E-Land World CEO."
E-Land filed a suit to overturn the Korea Fair Trade Commission (FTC) order. The Seoul High Court ruled to cancel 1.209 billion won of the penalty surcharge the FTC had imposed on E-Land. The appellate court found that E-Land Retail's real estate acquisition contract and the labor cost payments for former CEO Kim did not constitute acts of providing undue benefits.
The Supreme Court accepted the lower court's finding that the 56 billion won real estate contract deposit was offset in accounting against advances E-Land World had received from E-Land Retail, and that E-Land World did not actually receive an economic benefit. E-Land Retail did not in fact pay the 56 billion won deposit to E-Land World; it was only processed as paid in the accounts.
It also said that based on the evidence submitted by the Korea Fair Trade Commission (FTC), it was difficult to find that E-Land Retail had former CEO Kim provide labor to E-Land World.
However, it upheld the FTC's finding that E-Land Retail's failure to charge delinquency interest when transferring the SPAO brand to E-Land World amounted to conferring an excessive economic benefit. Accordingly, the penalty surcharge E-Land must pay was finalized at 2.87 billion won.