By Kim Tae-jong
The Fair Trade Commission (FTC) announced Wednesday that it was fining LG Electronics 1.9 billion won for illegally forcing its sales agencies to provide joint surety for electronic goods sold to construction firms.
The illegal practice was a measure to make sales agencies pay what construction firms owed if there were delays or failures in payment. Construction firms have long suffered from falling profits in recent years with some going bankrupt.
The firms buy electronic goods such as refrigerators, washing machines and gas ovens through sales agencies of electronics companies to install them in the new apartments they build. In such deals, sales agencies receive 4 percent of the sales price as a commission.
But LG Electronics has forced 29 agencies to stand surety for the electronic goods sold to builders since June 2008, according to the nation's anti-trust watchdog.
When they stand joint surety, sales agencies have to pay 20 percent of the costs of delivered goods or even 100 percent if the credit rating of construction firms is too low.
"LG abused its position and tried to shift all the risks to sales agencies, which is obviously an illegal and unfair business practice," said an FTC official.
LG also penalized those who refused to stand joint surety by withholding commission fees or breaking partnerships with them so that they could no longer do business.
"LG even abused the practice to increase its sales by forcing sales agencies to make a contract with construction firms which faced a liquidity shortage or were on the verge of going bankrupt," said the official.
Over the past five-and-a-half years, agencies have stood joint surety in 441 cases worth about 130 billion won.
LG employed the practice to maintain its dominant position in the "built-in" electronic goods market, the FTC said.
According to the FTC, LG accounted for over 50 percent of this market in 2010, with Samsung Electronics and Tongyang Magic having 30 percent and 14 percent, respectively.
The Fair Trade Commission (FTC) announced Wednesday that it was fining LG Electronics 1.9 billion won for illegally forcing its sales agencies to provide joint surety for electronic goods sold to construction firms.
The illegal practice was a measure to make sales agencies pay what construction firms owed if there were delays or failures in payment. Construction firms have long suffered from falling profits in recent years with some going bankrupt.
The firms buy electronic goods such as refrigerators, washing machines and gas ovens through sales agencies of electronics companies to install them in the new apartments they build. In such deals, sales agencies receive 4 percent of the sales price as a commission.
But LG Electronics has forced 29 agencies to stand surety for the electronic goods sold to builders since June 2008, according to the nation's anti-trust watchdog.
When they stand joint surety, sales agencies have to pay 20 percent of the costs of delivered goods or even 100 percent if the credit rating of construction firms is too low.
"LG abused its position and tried to shift all the risks to sales agencies, which is obviously an illegal and unfair business practice," said an FTC official.
LG also penalized those who refused to stand joint surety by withholding commission fees or breaking partnerships with them so that they could no longer do business.
"LG even abused the practice to increase its sales by forcing sales agencies to make a contract with construction firms which faced a liquidity shortage or were on the verge of going bankrupt," said the official.
Over the past five-and-a-half years, agencies have stood joint surety in 441 cases worth about 130 billion won.
LG employed the practice to maintain its dominant position in the "built-in" electronic goods market, the FTC said.
According to the FTC, LG accounted for over 50 percent of this market in 2010, with Samsung Electronics and Tongyang Magic having 30 percent and 14 percent, respectively.
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