Hankook Tire fined by FTC for price fixing its tires

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Hankook Tire fined by FTC for price fixing its tires

Hankook Tire & Technology, a major tire manufacturer in Korea, was fined by the Fair Trade Commission for pressuring retailers to sell tires above a specific price.

According to the country’s fair trade watchdog on Sunday, Hankook Tire set a price floor for tires it supplies to its retailers, violating the fair trade law. The commission slapped 117 million won ($99,450) in fines and issued a correction order for past violations.

The Fair Trade Commission said Hankook Tire mandated the sales discount rate be limited to between 28 and 40 percent of the standard market price when supplying its tires to retailers in 2017 and 2018. For instance, if the tire company supplied tires with a 100,000 won standard market price, the retailers were forced to sell the tires at between 60,000 won and 72,000 won, despite them being able to sell for lower prices. Even for foreign tires, such as Michelin and Pirelli tires, the company mandated the discount rate be limited to between 5 and 25 percent.

Hankook Tire controlled the retailers’ prices through a computer system. When retailers entered consumer information and details of their transactions on their online sales management program, prices that were outside the mandated guidelines were not able to be entered at all. When a manager would try to input a price that is off range, a warning message would pop up reading “abide by the given price guideline.”

As a large supplier in the market, the company also pressured retailers. When signing contracts with retailers, the tire supplier included terms that threaten to stop tire supplies if the retailers did not follow by the suggested pricing guideline.

“We issued a correction order as [the company] limited consumer benefits by blocking the free price competition of retailers,” said Lee Yoo-tae, an official from the Fair Trade Commission in charge of monitoring market activities. “We expect consumers to purchase tires at more reasonable prices.”

In April, the fair trade watchdog fined Kumho Tire 4.8 billion won and Nexen Tire 1.1 billion won for similar violations and reported them to the prosecution.

Hankook Tire is the largest tire manufacturer in the country by market share, accounting for some 30 percent of the local market. It is one of three big tire companies alongside Kumho Tire and Nexen Tire.

BY KIM KI-HWAN, KIM JEE-HEE [kim.jeehee@joongang.co.kr]
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