FTC clamps down on unscrupulous retail chains

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FTC clamps down on unscrupulous retail chains

Korea’s antitrust agency is getting tough on retail chains that bully their suppliers into lowering the price of goods and paying for marketing costs.

The Fair Trade Commission said Thursday it would seek to double the penalty for retailers that mistreat their suppliers, from a range of 30 to 70 percent of profit to 60 to 140 percent. In the past few years, the commission has consistently increased the penalty, last year raising it to 20 to 60 percent.

The commission also wants to lower the fine reduction given to companies that voluntarily report their business malpractices, from a maximum 50 percent to 30 percent. For companies that cooperate in investigations, they will get a 20 percent fine reduction, down from 30 percent.

The antitrust agency plans to make it harder for retailers to argue for a penalty reduction on the grounds of business impact by clarifying the previously ambiguous definition of a “struggling business.” Under current rules, a company can get a fine reduction if it can demonstrate lack of ability to pay or if the fine will have a specific impact on its business.

The proposed change would make the debt-to-income ratio and net profit the standards for measuring ability to pay a fine.

The Fair Trade Commission said it would announce a final version of the penalty changes in October after collecting public opinion. The legislature will then have to approve the reforms.

“We hope that the new fine system, once implemented, will deter antitrust activities by major retail companies and raise transparency beyond just applying a fine,” said Yoo Seong-wook, a Fair Trade Commission official in the business trade policy division.

Kim Sang-jo, the newly appointed chairman of the commission, has stressed protecting small businesses and leveling the playing field for fair competition as his priority. The chairman plans to meet with senior executives of the country’s leading conglomerates today at the Korea Chamber of Commerce and Industry.

However, the meeting will not be attended by any members of the companies’ founding families. In the case of Samsung Group, Vice Chairman Kwon Oh-hyun is expected to attend as Chairman Lee Kun-hee is still recovering from a 2014 heart attack and the company’s de facto leader, Lee Jae-yong, is in jail on bribery charges.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]
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