18 companies blamed for imposing high fees on small retailers

By Na Jeong-ju

A civic alliance filed a complaint with the prosecution Monday against 18 firms, claiming they had received kickbacks from agencies that acted as proxies for credit card firms and demanded they undergo investigation.

The agencies allegedly received fees from credit card firms for connecting them to merchants and are blamed for high credit card fees charged to independent retailers.

According to the alliance representing the interests of small businesses, the 18 firms received benefits, including cash, from the proxies through secret deals in return for keeping the transaction fees high.

“Due to their unfair and illegal practices, small retailers have had to pay high card fees. There should be a full-scale investigation,” the alliance said in a statement.

The companies include E-Mart, Family Mart, Samsung Digital Plaza, Lotte Data Communication, Hyundai Oilbank, S-Oil, and Korea University Hospital in Anam-dong, Seoul.

The alliance also urged the prosecution to investigate Korea Information and Communications, KSNET and 11 other proxies.

Associations of small-sized retailers and mom-and-pop stores have criticized the card firms for charging high fees, while the firms insist that current service charges are lower than the global average.

The country’s largest credit card issuers, Shinhan, KB, Samsung, BC and Hana-SK, said they would lower service fees imposed on small businesses like restaurants, florists and beauty shops, to the levels charged to bigger businesses.

Currently, card companies charge from 2 to 2.4 percent in transaction fees to large department stores and discount stores like E-Mart, whereas the average rate for small- and medium-size retailers is 2.6 percent, according to a report by the Financial Services Commission.

However, small storeowners have demanded a cut to as low as 1.5 percent, complaining of the persistent financial squeeze on them from the sluggish economy. Meanwhile, credit card issuers have enjoyed huge profits.

The civic alliance claims that the proxies forced retailers into contracts with a specific group of credit card companies, denying merchants the option to select the issuers they prefer, those that offer low fees.

“The proxies are behind the excessively high card fees for merchants,” it said. “There is virtually no competition among issuers to provide better services and lower fees due to the existence of the proxies.”