Namyang Dairy may share some profits with distributors

Namyang Dairy will share profits with its distributors in an effort to avoid being penalized by the antitrust agency.

The Fair Trade Commission (FTC) said Monday that Namyang Dairy has filed a tentative consent proposal in regard to its abuse of companies in its independent sales network in 2016.

A consent decision would allow the case to be closed without further penalty once the FTC accepts the voluntary corrective measures. It also means that the company would plead guilty to the accusation.

According to the FTC, the dairy company submitted corrective measures that include not forcing the distributors to accept a lower commission rate without their consent while keeping the rate above average of other dairy companies. It will also pay extra to distributors supplying milk to Nonghyup’s Hanaro Marts, which are located in remote areas, or those that generate small monthly revenue.

Additionally, the dairy company will create a win-win contract with the distributor’s council to provide discounts and activities and while providing 2 million won ($1,730) every month to fund the council for the next five years.

The company will share 5 percent of operating profit generated from supplying to Nonghyup.

During times of difficulty, the company will guarantee distributors a minimum 100 million won of profit.

Namyang Dairy will provide emergency funds without interest in cases where the owner of a distributor faces unexpected problems, offer college scholarships for children of distributor owners and child care benefits.

If the FTC accepts the dairy company’s consent proposal, it would be the first such agreement in three years. The last time the FTC accepted voluntary corrective measures was in 2016, in a case that involved LG U+ and false advertising.

Apple submitted a consent proposal in September. It related to alleged abuse of its bargaining power against the three Korean telecommunication companies - SK Telecom, KT and LG U+. The antitrust agency rejected the proposal and asked the company make changes and resubmit it.

Namyang Dairy’s consent proposal is likely to be accepted by the antitrust agency.

“[The corrective] measures were created in discussion with Namyang Dairy, and we hope they will contribute to the win-win partnership with franchisees,” said Seon Jong-gyu, director at the antimonopoly manufacturing division of the FTC.

The decision will be made by Feb. 22. The FTC will collect the opinion of the franchisees.

Namyang Dairy is accused of unilaterally lowering the commission rates paid to 225 distributors, from 15 percent to 13 percent, for their supply of milk to Nonghyup’s Hanaro Mart.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]