FTC slaps Namyang with big fine

The antitrust watchdog Fair Trade Commission (FTC) has imposed a total of 12.3 billion won ($10.7 million) in fines and corrective orders on Namyang Dairy, which forced distributors to buy its products and made distributors pay the wages of salesmen dispatched to large retailers.

Compared to other unfair trade cases, the penalties were relatively high.

The FTC decided that Namyang headquarters’ bullying of distributors to take an excessive volume of products regularly took place at the company level and ordered damages be paid not only to distributors who reported unfair practices but to the entire Namyang distribution network.

According to the FTC, Namyang forced distributors to accept products nearing their expiration dates and products that distributors did not order.

After distributors placed their orders via computer, salespersons from Namyang headquarters modified the orders according to their sales targets.

Since October, such order tampering by headquarters was more blatant with computer changes that allowed distributors to see the final order but could not search the originally submitted order.

Meanwhile, it is accused of refusing to accept the return of products so distributors would take the loss.

As such, the headquarters forced distributors to take about 26 such products, including slow-selling items and those nearing their expiration dates.

The FTC also found that Namyang Dairy shifted the wages of salespersons dispatched to large retail stores onto distributors.

Last year, Namyang forced distributors to pay 59 percent to 67 percent of the wages of 397 sales employees sent to large discount store chains and department stores.

Normally, distributors should receive 8.5 percent of sales as commission from the headquarters for supplying products to large discount store chains and department stores.

The FTC ordered the dairy producer to stop shifting wages onto distributors and forcing them to take excessive amounts of products. It also ordered the company to improve the transparency of its computerized ordering system.

“During this time when unfair trade practices of large headquarters against small distributors in the dominant-subordinate relationship has emerged as an issue, we decided that there should be immediate investigation and strict enforcement of the law,” said an FTC official.

“Through this measure, we expect the domineering nature of headquarters or the dominant parties in the business structure will be reduced.”

The FTC will also report Namyang Dairy Corporation employees involved in illegal acts to the prosecution for additional review.

BY KIM JUNG-YOON [kjy@joongang.co.kr]