The Board of Audit and Inspection has found that officials of the Ministry of Science, ICT and Future Planning went out of their way last year to help Lotte Home Shopping continue its lucrative business.
Under the Broadcasting Act, home shopping channels are required to renew their business licenses every five years. Lotte’s license, together with those of two other home shopping operators, was to expire in May last year.
Before launching the evaluation process, the ministry tightened the screening criteria, as a major corruption scandal involving Lotte employees had taken place in 2014.
Prosecutors indicted a total of 10 officials of Lotte Home Shopping on charges of taking kickbacks from suppliers or embezzling company money. They included Shin Heon, the company’s previous CEO who then led Lotte Shopping, one of the flagship companies of retail giant Lotte Group.
Before the screening process began, rumors circulated that Lotte Home Shopping might be denied license renewal due to the corruption scandal. But the company was unexpectedly allowed to operate its home shopping channel for another three years.
Suspicion of collusion between Lotte and ministry officials naturally arose, prompting the Board of Audit and Inspection to look into the evaluation process.
The state audit agency found that ministry officials calculated Lotte’s points in the fairness category without taking into account that two Lotte executives, including Shin, had been convicted of taking bribes.
Lotte earned 102.78 points in this category, but had the guilty verdicts handed down to the two executives been reflected, its final score would have been 94.78, as four points were to be deducted for each convicted executive.
Under the ministry’s tightened evaluation system, a score below 100 in any of the assessment categories meant an outright cancellation of a license or a conditional renewal.
The BAI also found that Lotte had intentionally omitted the two convicted executives from the list of its employees facing criminal trials. It noted that ministry officials were aware of the omission, but did not bother to tell Lotte to correct the error.
Furthermore, BAI inspectors found that three members of the evaluation committee were unqualified, given that one had served as a consultant for Lotte Home Shopping for two years, while two others had received money for giving lectures to Lotte employees.
The BAI instructed the ministry to reprimand its officials for their failure to apply the tightened screening criteria to Lotte. It also demanded appropriate action against Lotte in compliance with the Broadcasting Act.
The ministry can order a partial or full suspension of Lotte’s operation, shorten its license period or impose fines on it.
Lotte denied that it had intentionally omitted the convicted executives from the list of indicted employees. There was no reason to do so, it said, because the corruption scandal had already been widely reported. This argument hardly sounds convincing.
On Lotte Home Shopping’s website, the company proclaims: “Ethical management is our promise to customers and the source of our competitiveness.” But it appears to have failed to keep its promise to customers. An apology for the breach of this promise seems to be in order.
Lotte should realize that the ethical standards applied to home shopping companies are higher than for ordinary retailers because of the public nature of broadcasting and their strong influence on vendors.
