FTC increases fines on major trade infractions

The state-run corporate watchdog said Tuesday that it will raise the ceiling on fines for trade infractions by major retailers to 140 percent of the value of the violation, the latest indication of the trade authorities’ resolve to stem unfair practices by business heavyweights.

Under the revised ordinance by the Fair Trade Commission (FTC), which will take effect today, major retailers that have annual sales of 100 billion won ($89.2 million) or more will face a fine ranging from 60 to 140 percent of the value of the violation. This is double the previous 30 to 70 percent limit.

Major retailers such as Emart and Lotte Mart, as well as television shopping operators will be subject to tightened penalties.

Unfair business practices outlined by the FTC include forcing the return of items to suppliers and taking advantage of the labor force supplied by subcontractors.

The business watchdog defined these two acts as serious violations that would prompt it to impose a 140 percent penalty. If the violation is deemed a light one, then the authorities will impose the minimum 60 percent penalty.

The latest FTC measure came as the watchdog has strengthened its monitoring of unfair business and competition practices by business heavyweights that critics say exploit their influence and power at the expense of smaller suppliers.

The increased fines did not come as a surprise, as Chairman Kim Sang-jo was well known for championing small and medium-sized companies even before he was named by President Moon Jae-in to lead the business watchdog.

In addition to toughening up the penalties, the commission also specified conditions in which a major retailer could expect a reduction in fines. The state-run body said it will look into business conditions such as debt ratio and net profit to determine whether to mitigate some penalties. Previously, the commission only considered whether the penalties would cause serious damage to a firm’s business without taking into account its financial condition.

“With the implementation of a revised penalty system, we expect a stronger deterrence for major retailers to commit unfair business practices. We also expect more transparent execution of penalty reductions based on specified requirements for such reductions,” said the FTC in a statement.

BY KANG JIN-KYU [kang.jinkyu@joongang.co.kr]