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Lotte Group’s secretive ownership structure, which is tangled in a complex manner across the network of its South Korean and Japanese affiliates, is likely to become more transparent as the South Korean fair trade watchdog plans to strengthen regulations on conglomerates.

Korea Fair Trade Commission (KFTC) said in a legislative notice earlier this month that the country’s fair trade law would be amended to require de facto owners of conglomerates to disclose information on their foreign affiliates that made equity contributions – either directly or indirectly – to domestic affiliates. The revision is expected to be effective as early as the end of this year.

Conglomerates in KFTC’s watch list are currently only required to disclose information on their domestic affiliates. The regulator’s decision to expand the coverage of the law to include foreign operations came as more companies domiciled in South Korea have complex ownership structures involving foreign entities.

KFTC specifically mentioned Lotte Group as an example during its announcement of the revised rules, putting the target on the back of the conglomerate.

Lotte Group, led by chairman Shin Dong-bin, is known for its complex ownership structure involving Korean and Japanese units. Their operations seem to be separate, but in fact, Lotte Japan has significant influence over Lotte’s Korean operations.

Lotte Corporation, the Korean holding company of the conglomerate, is 21.86% owned by Lotte Japan, higher than a 13.04% stake held by Shin Dong-bin. Lotte Hotel and Lotte P&D, which are key affiliates of Lotte Korea, are controlled by Lotte Japan.

Few details have been revealed so far about the ownership structure of Lotte’s Japanese units, other than that Shin Dong-bin has full control of them, which was disclosed through a press release.

The revised rules will require Shin Dong-bin, who was designated as the de facto owner of Lotte Group by the KFTC, to disclose basic information of the conglomerate’s Japanese affiliates and details about their shareholders and equity contributions to domestic affiliates.

Lotte Holdings is the holding company of Lotte Japan, which is controlled by a tiny family-owned entity named Kwang Yoon Sa. Lotte Holdings’ investment vehicles called “L investment companies” own significant equity interests in Lotte’s Korean units including Lotte Corporation and Lotte Hotel.

If the revision becomes effective, Shin Dong-bin will need to disclose required information with respect to Kwang Yoon Sa and Lotte Holdings, which are both privately held. To do this, he will likely need support from his brother, Shin Dong-joo, who is the largest shareholder of Kwang Yoon Sa. However, it is uncertain whether Shin Dong-joo will help his younger brother after a bitter dispute between the two brothers over control of the conglomerate.

“The revised rules require disclosure of minimum information about foreign affiliates. We think a de facto owner will be able to gather that information without difficulties,” said an official at KFTC.

A representative for Kwang Yoon Sa said, “We have just begun to study the revised rules,” adding that they have yet to decide whether to disclose information or not. (Reporting by Eun-jin Choi)