FTC fines e-commerce sites for abuse of power

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FTC fines e-commerce sites for abuse of power

The Fair Trade Commission slapped fines worth a total of 130 million won ($121,000) on Thursday on leading e-commerce platforms WeMakePrice, Coupang and Ticket Monster, signaling that the regulator now considers major shopping websites to be as significant as brick-and-mortar retail chains.

The antitrust body said that all three were guilty of abuse of power against their suppliers, and violated the fair transaction law that applies to large retailers. This is the first time that the companies have received a penalty from the FTC for mistreating suppliers.

WeMakePrice was hit for 93 million won, the largest fine, followed by Coupang’s 21 million won and TMON’s 16 million won.

All three were cited for failing to issue written contracts to suppliers. The law mandates that large retailers give written contracts, including details on transactions, to suppliers.

WeMakePrice and TMON failed to meet the legal due date for payments to contractors, which is 40 days from the monthly closing of accounts. They were also late in paying off delay charges as specified by the law. However, the two companies eventually paid off all their outstanding bills, reducing the amount of fines the FTC handed down Thursday.

WeMakePrice passed on expenses from its online discount events to product suppliers without giving them written contracts, and made it part of the contract to stop suppliers from selling goods on other e-commerce sites for three months.

Coupang returned nearly 20 million won worth of products to suppliers without clearly stating the reasons why. TMON raised its commission by between 0.3 percentage points to 12 percentage points for 482 suppliers during the contract period, also without a clear reason.

The FTC said in a statement that the fines were calculated after considering that companies voluntarily resolved the issues and the fact that all three saw net losses for the last five months. The FTC’s ruling on Thursday is notable because the three companies received their penalties based on fair trade regulations made for large retailers.

WeMakePrice, Coupang and TMON were all start-ups when they launched in 2010 with a business model similar to American company Groupon, though they eventually changed into online markets for product suppliers. Although they are younger than decades-old retail conglomerates, their growth has been fast, and they collectively surpassed 3 trillion won in revenues last year.

The FTC’s decision signals that it no longer views WeMakePrice, Coupang and TMON as young companies that should be protected, but giants that have the upper hand in the e-commerce market over smaller suppliers.

BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]
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