[2024 National Audit] Intense Criticism on 'Delivery App Abuse and Tmep Incident'... "Expanding Safety Nets for Small Business Owners" (Comprehensive)

National Assembly Holds Ministry of SMEs and Startups Audit on 8th
Delivery Platform Abuse Criticized Across Parties
Opposition Claims 'Government Responsibility' Over TMEF Incident

At the National Assembly's inspection of the Ministry of SMEs and Startups held on the 8th, criticism focused on delivery platform fees and unfair terms and conditions, as well as government accountability regarding the Tmon and Wemakeprice (Timep) incident.

Both Ruling and Opposition Parties Criticize Delivery Apps

At the Industry, Trade, and SMEs Committee of the National Assembly that day, Kim Won-i, a member of the Democratic Party of Korea, stated, “I will talk about the blatantly unfair terms and conditions of Baedal Minjok, which go beyond visible power abuse to openly engage in unfair contract terms and conditions.”

Rep. Kim pointed out, “Article 8 of Baemin Store Seller Terms and Conditions stipulates that the company does not provide any guarantees and that all related responsibilities are borne by the seller, engaging in power abuse,” adding, “This appears to be a violation of the Terms and Conditions Act.”

Regarding the Baemin1Plus terms, Rep. Kim said, “Article 7 on store exposure states, ‘The company has the authority to decide the order, area, distance, and information of store exposure within the application,’ and ‘If adjustments or changes significantly affect the rights or obligations of the store owner, the company may implement them at its discretion after prior notice.’ The app’s store exposure order directly affects consumer choice and thus sales, so this clause allowing Baemin to unilaterally implement changes with just prior notice when it negatively impacts store owners is a serious abuse of power,” he emphasized.

Seo Wang-jin, a member of the Justice Innovation Party, said, “From January to September this year, Baedal Minjok changed its terms and conditions fourteen times, adding, revising, or deleting content in 96 clauses,” and added, “These changes are applied unilaterally without proper explanation or opportunities for negotiation.”

Park Hyung-su of the ruling People Power Party also said, “Baemin holds an overwhelming market share in the delivery app market?58.7% in 2022, 66.6% in 2023, and 61.4% as of June this year?holding a monopolistic position. It is criticized for frequently changing terms and fees to maximize its own profits,” and added, “I think the name ‘Woowa Brothers’ should be changed to ‘Ugly Brothers.’”

Park further asked Minister Oh, “I believe there is a very high possibility that this constitutes unfair conduct under the Fair Trade Act. The case has been reported to the Fair Trade Commission, which will make a judgment, but does the Ministry of SMEs and Startups intend to express its position to the Fair Trade Commission?”

Minister Oh Young-joo of the Ministry of SMEs and Startups replied, “We have been emphasizing that issues causing unfair problems to small business owners due to market dominance must be corrected,” adding, “If the investigation results in sanctions and the case is transferred to us, we will also be involved through business reports and penalty systems within a broad framework.”

Sellers and consumers affected by Tmon and Wemakeprice (Timap) held a Black Umbrella rally in front of the Tmon office in Gangnam-gu, Seoul, on August 13.
[Photo by Yonhap News]

Opposition: Government Responsible for Timep Settlement Delay Incident

The opposition continued to criticize the Timep settlement delay incident. Lee Eon-ju, a member of the Democratic Party of Korea, said, “I have pointed out government responsibility regarding the Timep incident, but the government’s attitude of denying responsibility is problematic,” adding, “The financial support loans from the Korea Credit Guarantee Fund and Industrial Bank of Korea have interest rates of 3.8?4.9%, which are higher than the average interest rates of 3.66?4.33% for household loans from the six major banks. This means there is little difference from getting a loan from existing banks, so what is the meaning of government support?”

Lee also pointed out, “There are about 50,000 affected companies, but only about 5.8% of the total damage cases have had loans executed,” and questioned, “Victims say support is insufficient, so why is loan execution at this level?”

Minister Oh responded, “Although there are many victims, about 85% have damages under 1 million won. Interpark also has many small-scale victims. As initially announced by the government, we are focusing more on victims with damages over 100 million won,” explaining, “We estimate that 85?90% are small-scale victims who often have not applied for emergency funds, and about 50% of those with damages over 100 million won have received support.”

Jeong Jin-wook, a Democratic Party member, also said, “The Ministry of SMEs and Startups is responsible for the Timep incident,” emphasizing, “The Small and Medium Business Distribution Center knew in April this year, when signing the sales support contract, that Timep was rejected by Seoul Guarantee Insurance due to ‘deterioration of financial soundness.’ The center paid the contract performance deposit in cash, while 38 other companies submitted contract performance insurance, making it clear to anyone that Timep’s situation had worsened.”

Minister Oh said, “I understand that the system was created according to the e-commerce ecosystem at the time, but we are reviewing these issues to prevent unnecessary problems.”

Jeong also said, “Prime Minister Han Duck-soo shouted, trembling, ‘There is no joint responsibility. How scary joint responsibility is,’ but Minister Oh, do you think there is no joint responsibility?” adding, “If legal responsibility is to be asked, there may be legal responsibility, and political and moral responsibility is naturally present.”

However, when Jeong’s remark about “Prime Minister Han trembling and shouting” was met with a request from Lee Cheol-gyu, chair of the Industry, Trade, and SMEs Committee, to “refrain from expressions and use dignified language as the National Assembly inspection is being watched by the public,” their voices rose, and the inspection was suspended for about 30 minutes.

Minister Oh Young-joo of the Ministry of SMEs and Startups is reporting on business operations at the National Assembly's Industry, Trade, Energy, Small and Medium Venture Business Committee's audit of the Ministry of SMEs and Startups on the 8th. Photo by Kim Hyun-min kimhyun81@

Public Home Shopping’s ‘Fake Hanwoo Bulgogi’ Controversy

Issues regarding the operation of Public Home Shopping under the Ministry of SMEs and Startups were also addressed. Park Sang-woong of the People Power Party criticized, “It is a serious matter that Hanwoo bulgogi products sold last year contained dairy cow DNA. Playing with food is unforgivable to our public sentiment,” adding, “Despite Public Home Shopping committing this, the CEO effectively escaped responsibility, and only eight people below the head of the department were disciplined, with a recommendation to refer the case to investigative authorities.”

Minister Oh responded, “I understand that the audit office deliberated on the appropriate level of disciplinary action during the audit process,” emphasizing, “I will personally oversee ensuring that Public Home Shopping establishes itself as a proper public institution that generates profits for small business owners and SMEs.”

Meanwhile, Minister Oh said that day, “We will prepare reasonable win-win measures between small business owners and delivery platforms, and strive to establish a fair order in supply and consignment transactions through the on-site settlement of the payment linkage system,” adding, “We will expand safety nets for small business owners and help revitalize and grow small businesses.”