Korea’s antitrust regulator has imposed corrective measures against a real estate subsidiary of Lotte Group over the retail giant’s recent acquisition of a transportation terminal asset in Incheon.
The Fair Trade Commission said Monday that it set preconditions on Lotte Incheon Development’s acquisition of Incheon Terminal and its land that houses a department store of Shinsegae, Lotte’s competitor, in the retail space.
The regulator said it would approve the deal only if Lotte sells two of its department stores in Incheon City and Bupyeong-gu, Incheon.
The FTC argued that Lotte’s purchase of the terminal and its real estate holdings were also indirectly linked to taking over property assets of Shinsegae, which signed a rental contract valid until November 2017.
The regulator demanded Lotte to sell two of its department stores within six months after Lotte repudiates the contract with Shinsegae or after the latter leaves the premises when its official contract expires.
The deal would likely hinder competition in the area, while giving fewer choices for regional consumers, the antitrust regulator said as a reason for imposing corrective measures and setting preconditions for the deal.
Even though it would be long before Shinsegae’s real estate contract with the terminal expires, the deal still poses a risk to fair competition as Lotte’s market share in the region’s department store sector is expected to increase to more than 63 percent from the current 31.6 percent after Shinsegae moves out.
The FTC by law imposes antitrust measures against a company whose market share increases to more than 50 percent, or against a company that leads the competition with a market share gap of more than 25 percentage points over its second-place follower.
Hotel Lotte, Lotte Engineering & Construction and Lotte Shopping, the flagship of Lotte Group, established Lotte Incheon Development last year as a special-purpose real estate vehicle for the construction of a shopping town in Songdo, Incheon.
Lotte Incheon Development acquired the terminal and its real estate holdings from Incheon City on Jan. 30 for 900 billion won ($799 million).
Incheon sold the terminal assets as the city was facing financial difficulties over the years, according to the antitrust regulator.
By Park Hyong-ki (
hkp@heraldcorp.com)
