Fixing the bad habits
The Fair Trade Commission slapped six TV home shopping channels with a combined 14.37 billion won ($12.9 million) in fines for unfair business practices. It is the first antitrust financial penalty on the home shopping industry. All six players were fined, with CJ O Shopping receiving the largest - 4.63 billion won - and NS Mall hit with the smallest of 390 million won. The commission notified the Ministry of Science, ICT and Future Planning, which is in charge of reviewing and extending business licenses to TV channels. An official at the agency said that it won’t add its own opinion, but will send a public statement for reference to the ministry for next month’s review. The ministry can cancel a license or shorten an existing license period. Without a license, the companies cannot go on air.
Home shopping industry brought stern actions on themselves, as the TV stations demanded merchandise suppliers to pay for TV sets and model fees. They delayed payment and often denied to pay interests. They frequently neglected giving out contracts and included unmeditated provisions when they did. They changed the air schedule randomly or cancelled programs when suppliers did not comply with their terms. They demanded suppliers to share up to 99 percent of the promotion cost which is regulated to be below 50 percent. They even asked suppliers to spy on rival channels and demanded to see the terms their competition offered.
These predatory and unconscionable business practices have been common in the TV home shopping industry. A handful of employees at Lotte Homeshopping from the chief executive to junior employees was indicted for pocketing money regularly from suppliers in April last year. Merchandise staffers at four companies were arrested for receiving bribes in 2012. The FTC said irregularities were commonplace in all six companies.
The purpose of allowing TV home shopping had been to help small and mid-sized enterprises that lack their own distribution and retail network. But according to a survey by the Small and Medium Business Administration, home shopping companies collected an average commission of 34.4 percent from small and mid-sized enterprises. The commission rate even beats 32 percent large manufactures charge their suppliers. The predatory and unfair ways of home shopping industry must not be tolerated. The government will be reviewing TV licenses for Lotte, Hyundai, and NS shopping channels next month. The government must put its foot down to fix the bad habits of the home shopping industry once and for all.
JoongAng Ilbo, Mar. 31, Page 30
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