TMON, WeMakePrice file for receivership, throwing a wrench into seller payment

Economy

Published: 29 Jul. 2024, 10:17 Updated: 29 Jul. 2024, 18:46

TMON, WeMakePrice file for receivership, throwing a wrench into seller payment

E-commerce platform TMON's headquarters in Gangnam District, southern Seoul, on July 24 [YONHAP]

TMON and WeMakePrice, online marketplaces owned by Qoo10, filed for receivership with the Seoul Bankruptcy Court on Monday amid a massive liquidity crunch.

If the companies enter court receivership, sellers suffering from delayed payouts may face even longer delays or not be able to receive their payments at all due to debt and asset freezes.

The government estimated the amount in question to be 213.4 billion won ($154.2 million), with TMON responsible for 128 billion won and WeMakePrice 85.4 billion won as of Thursday. However, the figure is expected to balloon significantly when pending settlements reach their due dates. Payments to merchants are typically settled about 50 to 60 days after the transaction.

Earlier in the day, the government announced that it would allocate more than 560 billion won toward resolving the liquidity crisis at the troubled e-commerce platforms during the second emergency task force meeting.

The emergency funding will be used to help small- and mid-sized enterprises stay afloat, as merchants on the imperiled online marketplaces have been affected by payout delays caused by the cash crunch at Qoo10.

Kim Beom-seok, the first vice minister of economy and finance, attended the meeting, along with representatives from relevant government agencies including the Financial Services Commission, Financial Supervisory Service (FSS) and Fair Trade Commission.

The government plans to work with travel agencies, card companies and payment service providers to expedite the refund process and set up channels for consumers to report damages and file for collective action.

To provide low-interest loans for small businesses suffering from delayed payouts, the Small Enterprise and Market Service and the Korea SMEs and Startups Agency will provide 200 billion won, while the Korea Credit Guarantee Fund and Industrial Bank of Korea will raise at least 300 billion. Additional financial support worth 60 billion won will be provided to travel agencies.

Moreover, the government will extend due dates for tax payments by up to nine months and support merchants' entry onto other online marketplaces, while helping travel agencies earn exemptions from flight cancellation fees for inevitable cancellation cases resulting from the recent incident.

Meanwhile, eight out of 11 payment gateway providers connected to the delays have begun to refund or cancel transactions for consumers affected by payout delays at TMON and WeMakePrice, according to the FSS on Monday. The remaining three companies plan to initiate the process soon.

The payment gateway vendors had pulled out of TMON and WeMakePrice and deactivated cancellation services last week. However, they began notifying customers on how to apply for card transaction cancellation as the FSS warned the companies that preventing consumers from canceling may violate the Specialized Credit Finance Business Act on Friday.

“Payment gateway vendors, which are paid by marketplace operators in the form of service fees, are obligated to bear the risks caused by the latest incident,” said FSS Deputy Gov. Park Sang-won, spearheading the non-bank supervision, during a press briefing held in the western Seoul on Monday.

The association of payment gateway service providers issued a press release on Friday, saying that they “have already remitted all of the money [paid by customers and credit card companies] to TMON and WeMakePrice,” stressing that “passing responsibility solely on to payment gateway vendors may lead to another liquidity crisis at the companies and jeopardize the whole e-commerce industry.”

Update, July 29: Updated headline, added the new development involving TMON and WeMakePrice filing for court receivership.

Update, July 29: Added details about the government's support measures, and the comment and update on the refund process from the Financial Supervisory Service.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]