[2024 National Audit] Ministry of SMEs Audit... Key Issues Including TMEF and Delivery Fees

Estimated Damage from T-Mef at 1.3 Trillion Won
Heads of Delivery Apps Selected as Witnesses

The Ministry of SMEs and Startups will undergo its first government audit under Minister Oh Young-joo's leadership on the 8th. This year, issues such as the TMON-WEMAKEPRICE (Timep) unsettled payments incident and the increase in delivery application (app) brokerage fees are expected to be key points of contention.

Oh Young-joo, Minister of SMEs and Startups, is reporting on business at the plenary meeting of the Industry, Trade, Energy, SMEs and Startups Committee held at the National Assembly on the morning of July 30.
[Photo by Yonhap News]

The National Assembly's Industry, Trade, Energy, SMEs and Startups Committee will conduct an audit targeting the Ministry of SMEs and Startups, the Korean Intellectual Property Office, and related agencies on the same day.

The biggest issue is the Timep unsettled payments incident. The government estimates the damage from the Timep case to be around 1.3 trillion KRW. The Ministry of SMEs and Startups has supported affected small business owners with a total of 392.5 billion KRW in funds, including increasing emergency management stabilization funds. Lawmakers from both ruling and opposition parties are expected to point out problems with existing measures and question Minister Oh and other ministry officials about additional countermeasures.

Responsibility for poor management of agencies under the Ministry of SMEs and Startups is also a core issue. The Small Enterprise and Market Service helped Timep enter the market as part of supporting small business owners' online sales. At the time, both companies were in a state of capital erosion, but the ministry proceeded with the project. Later, business reports raised doubts about the companies' ability to continue operations. Criticism has arisen that the ministry selected the companies without sufficient verification and neglected follow-up management and supervision. Public Home Shopping is also reported to be unlikely to recover 2.14 billion KRW in payments for goods consigned to WEMAKEPRICE, and the Industry, Trade, Energy, SMEs and Startups Committee has summoned former Public Home Shopping CEO Cho Sung-ho as a witness. Although Cho stepped down last month after his term expired, he was selected as a witness due to outstanding receivables during his tenure.

Peter-Jan Vandeput, CEO of Woowa Brothers, operator of Baedal Minjok, Vice President Ham Yoon-sik, and Kang Han-seung, CEO of Coupang, among other delivery app heads, have been called as witnesses to the National Assembly, so sharp questions regarding delivery fee conflicts are expected. These companies have set delivery app commission rates close to 10%, causing backlash from small business owners. In particular, Baemin recently raised its own delivery commission rate to 9.8%, up 3 percentage points from before, drawing concentrated criticism.

The Ministry of SMEs and Startups formed the ‘Delivery Platform-Merchant Win-Win Council’ in July and has held five meetings but has yet to reach a conclusion. The council includes major delivery platforms Baemin, Coupang Eats, Yogiyo, and Ttaenggyeoyo, as well as representatives of small business owners such as the Federation of Small Businesses, Korea Foodservice Industry Association, National Franchise Owners Association, and National Merchants Federation. Additionally, the ministry plans to invest 203.7 billion KRW in the next year's budget to support small business owners with up to 300,000 KRW annually for parcel and delivery fees. Lawmakers from both sides are expected to emphasize the ministry's active role within the win-win council and evaluate the appropriateness of the new project.

Meanwhile, the government audit of agencies under the Ministry of SMEs and Startups, including the Small and Medium Business Corporation, Korea Technology Finance Corporation, and Small Enterprise and Market Service, will be held on the 22nd.