Foreseen Tmon and Wemakeprice 'Payment Delay' Incident... Authorities Conduct Emergency On-site Inspection and Establish Complaint Center (Comprehensive)

Joint Investigation Team Formed by FSC and Fair Trade Commission for On-Site Inspection
Payment Delays for Tenant Companies Since July... Financial Deterioration Since June 2022
FSC Requests Cooperation from Card and Travel Industries
Concerns Over Spread as Second Merge Point Incident

As the settlement delay crisis involving TMON and WEMAKEPRICE causes increasing damage to consumers and marketplace sellers, the Financial Supervisory Service (FSS) has formed a joint investigation team with the Fair Trade Commission and launched an urgent on-site inspection and investigation. The FSS plans to establish and operate a dedicated complaint reception window.

On the 25th, Lee Se-hoon, Senior Deputy Governor of the Financial Supervisory Service, held the first related briefing since the TMON and WEMAKEPRICE settlement delay incident at the FSS office in Yeouido, Seoul, stating, "As the settlement delays continue, there is concern about damage to consumers who purchased goods and services through these companies and to the marketplace sellers." TMON and WEMAKEPRICE, subsidiaries of Singapore-based e-commerce company Qoo10, operate as online marketplace intermediaries under the Electronic Commerce Act and as electronic payment gateway (PG) providers under the Electronic Financial Transactions Act.

The delay in payment settlements to sellers on TMON and WEMAKEPRICE began in July. Following WEMAKEPRICE’s delay in settling payments amounting to 36.9 billion KRW to 491 sellers on the 11th, additional settlement delays occurred in the third week of this month as some sellers left the platforms, causing a sharp drop in sales and worsening liquidity. The parent company Qoo10 only issued a statement on the 17th announcing completion of settlements through the end of July, payment of 10% delayed interest, and a 3% reduction in seller commission fees as compensation for sellers.

First, the joint investigation team, composed of staff from the FSS and the Fair Trade Commission, has launched urgent on-site inspections and investigations to monitor in real time the scale of settlement delays, seller departures, and the status of user refund requests and payments. Deputy Governor Lee explained, "We are reviewing the funding and usage plans submitted by TMON and WEMAKEPRICE and monitoring their funding status," adding, "We plan to investigate violations of obligations such as refund duties under the Electronic Commerce Act and service supply contract fulfillment obligations."

Additionally, a dedicated complaint reception window will be operated to prevent consumer damage and protect sellers. The FSS has established and begun operating a dedicated complaint reception desk from today to enable consumers and sellers affected by this incident to quickly file complaints. It also plans to establish a system for credit card companies related to payments for gift certificates, travel products, and others to respond to customer complaints. The Fair Trade Commission will also operate a dedicated team at the Korea Consumer Agency to support consumer damage relief and dispute mediation related to refund delays or refusals.

Deputy Governor Lee stated, "To ensure swift damage relief, we are preparing and initiating collective dispute mediation and will actively support civil lawsuits depending on future circumstances," adding, "Funds received for settlements will be used exclusively for settlements, and we plan to encourage escrow contracts with banks and other financial institutions."

The FSS also requested cooperation from the card and travel industries to minimize consumer damage. Lee said, "We will primarily ask the card industry, which intermediates transactions between consumers and TMON/WEMAKEPRICE, and the travel industry, which sells products, for active cooperation to minimize consumer damage," adding, "Card companies will be requested to respond to consumer cancellation and refund demands and to coordinate additional fund settlements with TMON and WEMAKEPRICE." He further explained, "Travel agencies have the primary obligation to provide the products sold," but noted, "Small and medium-sized agencies face difficulties operating if settlement payments are not made, so we are consulting with the Ministry of Culture, Sports and Tourism and others."

Regarding criticism that financial authorities failed to prevent the crisis in advance, Lee explained, "There are practical difficulties in suspending business or canceling registration." He said, "TMON and WEMAKEPRICE have not met capital and liquidity requirements under electronic financial supervision regulations for a considerable period, but since startups require significant initial investment, it is difficult to take uniform measures even if they are in a state of capital erosion."

He drew a line on the possibility of the unsettled payment crisis spreading to other e-commerce platforms. Lee stated, "While the exact cause must be identified through on-site inspections, it cannot be ruled out that funds were used during an aggressive business expansion process," adding, "From this perspective, this is considered a unique case different from other companies."

[Image source=Yonhap News]

Meanwhile, on the same day, after reporting to the National Assembly’s Political Affairs Committee in the morning, FSS Governor Lee Bok-hyun responded to lawmakers’ questions about the possibility of the TMON and WEMAKEPRICE crisis spreading into a second Merge Point incident by saying, "We have dispatched an inspection team of six personnel to conduct on-site inspections," and "We are verifying whether the numbers reported by the related companies are appropriate."

Regarding whether the Electronic Financial Transactions Act, which requires separate management of prepaid funds, was properly observed, he said, "It is scheduled to be enforced from September, but it has been managed in a guidance form before that," adding, "We do not expect consumer damage to spread in that regard."

Regarding concerns about delayed settlements by Qoo10, which owns both companies, he replied that a management improvement agreement had been in place for some time. Governor Lee explained, "Since June 2022, intensified competition within the industry worsened capital ratios and financial conditions, and we have been managing this through a management improvement agreement," adding, "The issue of delayed settlements to marketplace sellers has been specifically managed since this month."