Payola hits the online market

The Internet is an infinite sea of information and content, often too murky to decipher what is true and false and what is right and wrong. Reliability is one of the reasons why big corporate brands and names draw users. G-Market, Internet Auction and 11th Street are top online shopping sites. G-Market and Auction have been sold to U.S.-based eBay Inc. and 11th Street is run by SK Group.

Online markets generate revenues of 12 trillion won ($11.1 billion) to 15 trillion won a year. Over 80 percent of the users are in their teens or 20s. They frequent the sites because they believe in honest prices and customer service. Market leader G-Market promises on its Web site, “We don’t seek external growth. We do our best to satisfy our customers based on transparent and ethical management.”

But it turned out to be a big lie. A recent antitrust investigation discovered that the three companies pocketed tens of billions of won in profits annually by cheating and ripping off customers. They promoted hyped-up categories of best-selling items and premium products to entice customers.

The products that were highlighted, however, were not selected based on their sales figures or product quality. Rather, they received special treatment because the producers had paid money to advertise them. A top ranking was not bestowed based on excellence and demand, but was only determined by advertising payola.

The three shopping Web sites earned 250 billion won over the last three years because of this fraudulent strategy. The revenue came from the commissions they made on the sale transactions. “The companies have conducted a sham against consumers for the last three years, and earnings from such sales accounted for about 15 percent of their total revenue,” a Fair Trade Commission official said.

The FTC nevertheless imposed a slap-on-the-wrist fine of only 18 million won on the three companies - 8 million won on G-Market, and 5 million won each on Auction and 11th Street - a paltry sum compared to how much money they made from deceiving customers. It is fortunate that the antitrust agency said that penalties will be heavier if the companies violate market regulations again. But misleading consumers should be regarded as a crime. After all, the Supreme Court believes this type of malpractice constitutes fraud. The FTC should be more aggressive and stricter in establishing order and credibility in the online shopping industry.