CJ CGV fined for illegal trading with owner family’s ad firm

[THE INVESTOR]  The Fair Trade Commission said on Sept. 29 that it has decided to impose a 7.17 billion won (US$6.50 million) fine on CJ CGV, CJ Group’s multiplex theater chain, for illegal trading with an affiliate owned by an owner family member.

The antitrust watchdog said it has found that JS Communications, an ad unit 100 percent owned by CJ Group Chairman Lee Jay-hyun’s younger brother Lee Jay-hwan, has enjoyed unfairly exclusive rights to handle CJ CGV’s ad sales since its establishment in 2005. 

Over the past decade, the firm has been paid generous commissions by CJ, almost 25 percent higher than those offered to other ad firms.

During the years, the firm’s asset has soared from 340 million won to 24.68 billion won, while its market share has also almost doubled to 59 percent.

The FTC said the illegal inter-unit trading with CJ CGV, worth about 10.2 billion won, has played a key role in the firm’s rapid growth.

Inter-unit trading is not illegal here but is subject to criminal charges when it is used to elevate sales and stock prices of a subsidiary in which the owner family holds a major stake.

By Lee Ji-yoon (jylee@heraldcorp.com)