Ministop fined by FTC over illegal contracts

The Fair Trade Commission slapped convenience store chain Ministop with a 234 million won ($207,796) fine on Tuesday for signing illegal contracts for incentive payments from the company’s suppliers.

The FTC announced Tuesday that the convenience store chain signed incomplete contracts for 23.1 billion won worth of incentive payments it received from 236 suppliers between January 2013 and November 2016.

These payments are given to retailers from suppliers in order to boost sales of the suppliers’ products. In exchange, the retailer could place the supplier’s products at a place customers are more likely to look at. Suppliers can also give retailers payments as an incentive for improved products sales.

According to Korea’s fair trade law, it is not illegal for major retailers to receive these kind of payments from suppliers. However, in order to do so, they are obliged to clearly state details, like how many times the payments will be given and for what reason, in a written contract. Any changes to the terms regarding these payments should also be printed in a written agreement. Omitting any of the legally defined details is against the law.

Among the suppliers were conglomerate affiliates, but most of them were small and medium-sized enterprises, the FTC said. The commission defined the illegal contracts as a case of gapgil, or abuse of power, by Ministop.

Ministop also did not fulfill its legal obligation to preserve the contracts on 225 promotion events held between Jan. 2013 and Aug. 2015. Major retailers are required to keep such contracts for five years after the contract term is over. The FTC imposed an additional penalty of 1.5 million won on Ministop over this.

The convenience store chain’s headquarters told the FTC that the violations were the result of mistakes made my staff members.

“Transactions in convenience stores are expanding thanks to the increasing number of single households and demand for easier meals like boxed lunches,” the FTC said in a statement. “The commission will constantly look for and punish the unfair practices of major retailers against their contractors.”

BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]