[Asia Economy Reporter Moon Chaeseok] The Fair Trade Commission wielded its authority against the abusive practices of Nonghyup and Lotte towards their suppliers within a span of three days. In Lotte's case, a fine approaching 4 billion KRW was imposed.
Earlier, on the 25th of last month, the Fair Trade Commission announced that it would issue corrective orders and impose a fine of 780 million KRW on Nonghyup Hanaro Distribution and Nonghyup Distribution. Three days later, on the 28th, corrective orders and a fine of 3.91 billion KRW were imposed on Lotte Shopping and CS Distribution.
They were caught engaging in violations of the Large-scale Distribution Business Act, such as delivering contracts late, returning products without justifiable reasons, and improperly receiving incentives.
They also recklessly employed employees from supplier companies. This not only blatantly violated the "win-win" principle emphasized by the Fair Trade Commission but also revealed that the chronic abusive practices of large distribution corporations towards suppliers have been openly carried out.
Kwon Soon-guk, head of the Distribution Transaction Division at the Fair Trade Commission, explained the significance of the sanctions against Nonghyup, stating, "This case is not only about imposing fines and other penalties but also about obtaining commitments from the violating businesses to improve transaction systems to prevent recurrence and protect suppliers from harm."
He also said, "We plan to strengthen monitoring activities against chronic unfair trade practices by large-scale distributors, such as 'improper receipt of sales incentives' and 'unfair use of employees.'"
Regarding the Lotte case, he added, "Given concerns that the COVID-19 crisis may increase incentives for large-scale distributors to shift costs unfairly through promotional expenses, sales incentives, and return costs, we will continue to strengthen monitoring of their unfair practices."
However, there is no clear fundamental measure to stop the longstanding practice of distributors openly violating the Large-scale Distribution Business Act.
A typical example is that despite establishing a standard transaction contract, such behaviors by Nonghyup and Lotte could not be prevented.
In January, the Fair Trade Commission revised regulations to require complex shopping malls, outlets, and duty-free shops to adopt the standard transaction contract. Prior to that, department stores, large supermarkets, TV home shopping, convenience stores, and online shopping malls were already subject to it. Nevertheless, distributors have openly violated the law.
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