Hyundai Motor fined for stifling competition

In another blow to Korea’s leading automaker, the Fair Trade Commission has fined Hyundai Motor Co. 23 billion won ($25 million) for abusing its market dominance to control its independent sales agents.
The antitrust agency said yesterday that Hyundai Motor had been restricting independent agents’ relocations and hiring practices over the past few years because of agreements with the labor union of the automaker’s wholly-owned sales outlets.
Hyundai Motor sells cars both through its own and independent channels.
“Hyundai Motor’s sales units are actually rivals of independent agents,” said Kim Won-jun, director general of the Fair Trade Commission’s competition policy enforcement branch. “So, the labor union at the units demanded that Hyundai restrict independent agents’ moves to better locations or work force expansion. And the automaker accepted that demand.”
The antitrust agency has ordered Hyundai Motor to correct or cancel the agreements with the labor union within two months. It also imposed the second-largest fine it has ever handed out on charges of market dominance, smaller only than the 32 billion won it fined Microsoft Corp. of the United States in 2005. Microsoft has appealed that fine in Korean courts.
Hyundai Motor forced independent agents to get prior approval before moving to new locations or hiring more people, and threatened not to renew contracts with those who did not comply, according to the commission. Between 2003 and 2005, 30 agents failed to get approval for relocation, and the automaker issued 463 warnings to agents who employed workers without approval.
While limiting independent agents’ business, the automaker imposed “excessive” sales targets on them as well, the antitrust agency said. “We can say the targets are excessive because more than 80 percent of independent agents failed to meet them in 2004 and 2005,” Mr. Kim said. Then, the automaker sent written warnings to the agents and refused to renew contracts with seven of them since 2003.
For fear of losing those contracts with Hyundai Motor, which with its affiliate Kia Motors Corp. accounts for almost three-quarters of Korea’s vehicle market, many independent agents bought cars themselves before quota deadlines and then resold them to consumers later.
“The victims of those practices are the agents, who had to cover the cost of holding the cars, and consumers, who bought cars that were not directly from the factory but had been held by sales agents for some time,” Mr. Kim said.

By Moon So-young Staff Writer symoon@joongang.co.kr