By Park Jin-hai
The Fair Trade Commission (FTC) has fined CJ O Shopping, Lotte Homeshopping and four other TV home shopping channels a combined 14.4 billion won (12.98 million) for unfair business practices.
Irregularities ranged from the intentional delay of signing contracts with suppliers, non-payment or overdue payment of goods received, passing the costs of TV sales promotion to suppliers and unilaterally changing contracts on commissions.
The four other companies punished are GS Homeshopping, Hyundai's Hmall, HNS Mall and NS Mall.
It is the first time that home shopping channels have been slapped with fines for unfair business practices by the commission.
It is the anti-trust watchdog’s first move to apply the toughened Large-Scale Retailers` Fair Trade Practices Act to penalize big companies that engage in illegal trade with their suppliers.
CJ O, which has been slapped with the largest fine of 4.6 billion won, was revealed to have passed 99.8 percent of sales promotion costs or 5.6 billion won to its 146 suppliers.
Lotte, fined 3.7 billion won, failed to sign contracts with suppliers or delayed inking formal contracts for products they received.
Lotte, GS, Hyundai, HNS and NS meanwhile demanded sensitive management-related information from suppliers, including sales figures and contract conditions with rival home shopping channels.
GS and Lotte malls unilaterally raised commissions on suppliers, citing their poor sales figures.
"By taking firm action against large home shopping channels, this latest action should send a clear message to the retail sector that we won’t tolerate unfair business practices," the FTC said in a statement.
So far, the commission’s regulatory measures on home shopping channels have remained at issuing warnings or correction orders, while its penalties were limited to 2 percent of sales under the Fair Trade Act.
Under the new act, however, fines can stretch to the total payment of the goods delivered.
The results of its findings have been sent to the Ministry of Science, ICT and Future Planning, which is tasked with reviewing and extending businesses licenses for these companies.
It can either revoke the renewal of the offenders or shorten the already approved license period.
Lotte and Hyundai are due to renew their business license in May, followed by NS and HNS in June, CJ O and GS in July. If they are not given approval, they cannot run their business in Korea.
The FTC said it will work with other agencies to keep a close eye on shopping malls so a free and fair trading environment can be maintained.
“A pan-government task force launched last month to normalize the home shopping segment will be run and their function to protect small suppliers as a watchdog will be enforced,” said the FTC.
However, the commission stopped short of bringing the case to court. It said that under the new act, requesting sensitive management-related information is what the commission can sue companies for. “It lacked evidence that the information accrued has been exploited to raise commissions and no coercive measures have been used in the process,” said the state anti-trust body.