FTC revises agreement to protect retail suppliers

The Fair Trade Commission has come up with measures to put an end to the practice of large retailers unloading the cost of interior design changes and promotional activities on their suppliers.

Department stores and large discount stores have been forcing suppliers to pay for product promotions and remodeling stores under the aegis of increasing brand value.

The government watchdog released a revised standard trade agreement yesterday containing a cost-sharing plan and vowed to enforce contractual implementation of the agreement.

The FTC first ordered department stores and large discount stores to bear the cost of the infrastructure and basic facilities construction like lighting, walls and floors.

According to the revised agreement, when department stores seasonally revamp interior designs, they must pay, and when the changes are made for reasons related to suppliers, the cost should be shared.

The FTC estimated the changes would save suppliers of large discount stores and department stores at least 135 billion won ($120 million), or 24 million won per store, annually.

Meanwhile, the FTC is believed to be monitoring TV home shopping companies, which have been shifting costs for broadcast production, automated response system (ARS) discounts and other sales promotions to suppliers.

Some home shopping companies make suppliers pay for celebrities and models.

The FTC stipulated that TV home shopping companies must pay for broadcast production costs, and they are banned from transferring more than 50 percent of promotional costs to suppliers.

In addition, home shopping retailers can charge suppliers for the costs of returning goods only when there is a problem with the product.

The FTC estimated that when the rules are applied, each supplier of TV home shopping companies will be able to save 103 million won a year.

“We plan to recommend that related businesses use the standard trade agreement,” said an FTC official. “In addition, we plan to monitor the possible balloon effect of large retailers passing on increased costs caused by sharing the burden to suppliers in other forms.”

By Kim Jung-yoon [kjy@joongang.co.kr]