Prosecutors Begins Investigations into CGV over Giving Chairman’s Family Unfair Deals

CJ CGV has come under investigation over allegations that the company gave unfair advantage to a family member of CJ Group Chairman Lee Jay-hyun.

The Seoul Central District Prosecutors’ Office announced on October 20 that it has begun investigations into CJ CGV following a report from the Fair Trade Commission (FTC). The antitrust watchdog said it has found that CJ Group Chairman Lee Jay-hyun had given favorable business contracts worth 10.2 billion won (US$8.69 million) to JS Communications, an advertising agency wholly owned by the CJ chairman’s younger brother Lee Jae-hwan.

The FTC filed a complaint to the prosecutors against CJ CGV for violating the fair trade law at the end of September, saying, “CJ CGV signed a contract with JS Communications to produce advertisements for the cinema chain in August 2005, and offered a commission rate that was 25 percent higher than that given to previous contractors until November 2011. As a result, JS Communications made unfair profit amounting to 10.2 billion won (US$8.69 million) between 2005 and 2011.”

According to the prosecution, CJ CGV, the nation's largest multiscreen operator, made screen ad contracts with Sanyang C&C from the late 1990s to July 2005. However, it canceled the contracts with the independent screen advertising agency and commissioned all the work to JS Communications when the company was founded in July 2005. JS Communications had enjoyed unfairly exclusive rights to handle ads for all 42 theaters run by CJ CGV at that time.

The prosecution will summon CJ CGV CEO Seo Jung as defendant in the near future.