Major supermarkets are fined total of 24 billion wonThe Fair Trade Commission on Wednesday fined the country’s three major discount supermarket chains a total of almost 24 billion won ($20.2 million) for unfair business practices on suppliers and for the first time reported one of the retailers to the prosecutor’s office for further investigation.
The antitrust agency penalized Homeplus, E-Mart and Lotte Mart for repressing suppliers, which includes cutting back on payments and illegally leasing employees from suppliers.
This is the biggest amount that the FTC has ever levied on the retailers. The last record was in April 2015 when six TV home shopping companies were slapped with a 14.4 billion won fine.
The FTC said that among the three, Homeplus received the heaviest penalty for manipulating suppliers.
Homeplus was slapped with a 22 billion won fine and was the only retailer of the three reported to the prosecutors’ office.
Between January 2014 and March 2015 Homeplus paid four suppliers less than what it owed after taking out what it labeled as monthly promotional expenses. Under the law the retailers can only reduce the payment when the products that the supplier provided are faulty. Additionally, the promotional expenses can only be accepted when the supplier voluntarily pays the retailer. However, Homeplus levied a certain amount of promotional expenses to all suppliers, which is considered to be forced.
The FTC said that during the 14 months, Homeplus was able to save 12.1 billion won by reducing payment to suppliers.
Additionally, the FTC said that when Homeplus hired suppliers’ staff as promotional sales employees it placed a financial burden on suppliers. To recover the human resource expenses the 10 suppliers were forced to make additional purchases, such as buying in-store advertisements or receiving products for free.
In doing so, Homeplus recovered 16.8 billion won on human resource expenses.
The FTC said Homeplus also forced 364 products to be returned to the suppliers as they were no longer in season, although the products were not seasonally sensitive products. The retailer also got 270 employees from 16 suppliers as leased employees to work on displaying products when opening 15 branches.
E-Mart and Lotte Mart also treated its suppliers unfairly, the FTC said.
E-Mart was hit with a 1 billion won fine for forcing employees of suppliers to display products when opening or renewing branches, while it sent back products, such as toys, that were not season sensitive.
Lotte was fined 858 million won for similar practices but also for forcing payments on promotional events.
BY LEE HO-JEONG [email@example.com]