FTC to lessen fines on wholesalers

By Park Jin-hai

The Fair Trade Commission (FTC) is moving to cut back fines levied on wholesalers that abuse their power against subcontractors and small distributors.

When revised, the fines will be calculated based on the “amount of money in violation of the relevant law,” instead of the “payment of goods.”

For instance, when a wholesaler receives 1 billion won of goods from a supplier and returns 100 million of stock at the end of the year unfairly, the fine will be calculated by the FTC on the basis of the 100 million, not the 1 billion won, as is done now.

The industry is concerned it could dilute the Large-Scale Retailers' Fair Trade Practices Act, enacted in 2011 to realize the “democratization of the economy,” following the Namyang Dairy Products scandal.

The dairy maker was under fire for abusing its power and pressuring or unfairly dumping products onto distributors to meet sales quotas.

Following the scandal, the fine was increased to be based on the payment for the goods.

Min Byung-du, of the main opposition New Politics Alliance for Democracy, said: “The revision move comes counter to the purpose of its upper law, the Large-Scale Retailers' Fair Trade Practices Act.”

An industry insider said: “When the fine was raised, people started to perceive that they no longer could get away with illegal business practices. When the notification is revised, it could bring back the old practice that originates from the relationship between ‘dominant’ and ‘subordinate’ in business contracts, because the gains from unfair practices are much higher than the fines.”

The FTC, after the Namyang scandal, expanded investigations to other companies to crack down on illegal business practices. Those investigations resulted in several legal battles, but the FTC lost due to a lack of evidence in many cases.

The FTC says the revision does not run counter to the current act because the “amount of money in violation of the relevant law” is part of “the payment of goods.”