AmorePacific under probe for alleged unfair trade

State prosecutors have launched an investigation into South Korea's top cosmetics maker AmorePacific Corp. for its alleged unfair trade practices, industry and official sources said Monday.

The move comes after the Fair Trade Commission (FTC) last year accused AmorePacific of unilaterally reallocating 3,482 door-to-door sales personnel belonging to its existing special agent outlets to new special agent stores and those run directly by the company.

The practice, carried out in the 2005-2013 period, has been cited for directly impacting profits of existing special agent stores. The antitrust watchdog said such actions constituted an abuse of superior position enjoyed by AmorePacific vis-a-vis its special agent. The FTC ordered administrative corrections, slapped a 500 million won (US$428,000) fine and referred the company and a key executive to the state prosecutors' office.

Special agent stores, which only sell AmorePacific products under contract, account for some 20 percent of the cosmetic company's domestic sales and use its sales personnel to sell high end products such as Sulwhasoo.

Sources said the Seoul Central District Prosecutors' Office is looking into possible wrongdoing by AmorePacific and one of its former directing managers, who has only been identified by his surname Lee.

The FTC claimed that Lee was directly involved in the reallocation of sale personnel and even called for the replacement of special agent stores that were underperforming.

"We are carefully looking into all allegations made and records provided by the FTC," said an insider at the prosecutors' office. He said that Lee will be summoned for questioning in due course.

The FTC said taking firm stance against unfair trade practices will send a clear signal to the business community that the government will clamp down on big companies that abuse their power to hurt its agents and dealers. (Yonhap)