FTC dealing fines after corruption findings

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FTC dealing fines after corruption findings

The Fair Trade Commission (FTC) has put major home shopping TV networks on tenterhooks after dishing out about 14.4 billion won ($13.02 million) in fines to six local home shopping channels for unfair trade practices with suppliers.

The latest findings from the FTC exposed numerous corruption cases in the industry as a handful of television-based retailers forced vendors to curry favor to get their products on the air.

The six retailers include GS Home Shopping, CJ O Shopping, Hyundai Home Shopping, Lotte Home Shopping, Home & Shopping and NS Home Shopping, with CJ O Shopping receiving the heaviest fine of 4.63 billion won.

The FTC said in a statement on Sunday that it will refer the findings to the Ministry of Science, ICT and Future Planning. The Ministry is responsible for extending business licenses for TV home shopping channels.

Lotte Home Shopping and Hyundai Home Shopping will undergo a screening process set for May, while NS Home Shopping will receive an evaluation in June. The FTC will decide on NS Home Shopping’s renewal of operations in June 2016, and GS Home Shopping and CJ O Shopping’s renewals in March 2017.

This is the first time the FTC applied the strengthened March 2013 Large Scale Retailers’ Fair Trade Practices Act to punish big companies for illegal trading with their suppliers.

The act intends to effectively prevent big companies from extorting smaller vendors.

The companies face accusations of unfairly employing leverage against suppliers and tenants, and redirecting advertisement costs to suppliers.

According to the FTC, CJ O Shopping, second-largest by market share, did not send contracts to 351 suppliers, and did not pay advertisement costs while forcing merchants to use a smartphone app charging higher commission fees.

The FTC also found that Lotte Home Shopping, receiving the second-highest fine at 3.7 billion won, did not send copies of contracts either. The channel also made orders to 18 merchants and companies without contracts.

The FTC accused the retailer of delaying 177 million won in sales and demanding unnecessary information such as commission fees paid from suppliers to other TV networks.

The findings are expected to deal a huge blow to Lotte Home Shopping after former chairman Shin Heon faced charges of pocketing money from suppliers in June 2014.

Shin paid a fine of almost 90 million won and is serving a two-year sentence after going to trial and being convicted in November 2014 for receiving a 100 million won bribe from a supplier and embezzling about 300 million won of the company’s funds.

GS Home Shopping, the No.1 player, unfairly coerced a supplier into paying 72 million won to make up loss at the company on top of the failure to notify contract terms to 327 contractors.

The FTC found that Hyundai Home Shopping passed on advertisement costs to 70 suppliers.

Smaller retailers - Home & Shopping and NS Home Shopping - committed similar business practices.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]
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