Gov't to begin providing liquidity to vendors hit by Qoo10 payment delays

Victim of payment delays by TMON and WeMakePrice protests in Jung District, Seoul, Aug. 4. Yonhap

The government will begin providing financial support this week to e-commerce vendors hit by the recent payment delays of Qoo10-owned TMON and WeMakePrice, officials said Tuesday.

Earlier in the day, government and ruling party officials agreed to provide liquidity of some 500 billion won ($365 million) in support for small vendors on the two e-commerce platforms.

Starting Friday, the Industrial Bank of Korea and the Korea Credit Guarantee Fund will receive applications for a liquidity program that will provide over 300 billion won in credit guarantees at a preferential rate of 3.9 percent, according to the Financial Services Commission.

An additional 200 billion won in low-interest loans will also be offered to small businesses facing payment delays starting Friday, it added.

Such businesses may also apply for an up to one-year extension on their existing loans beginning Wednesday.

The emergency support measures were announced late last month after the two e-commerce platforms, owned and operated by Singapore-based Qoo10, failed to make due payments to their vendors since as early as May due to what many observers believe were "aggressive merger deals."

Qoo10 founder and CEO Ku Young-bae has acknowledged that the company had used funds from TMON and WeMakePrice to acquire the U.S. online shopping platform Wish, but claimed the money has since been returned.

The financial regulator warned the damage from delayed payments may continue to grow, surpassing 1 trillion won, as payment deadlines for the two e-commerce platforms' transactions in June and July approach.

Financial Minister Choi Sang-mok promised a wide-range of regulation reforms to prevent a recurrence of such payment delays in a government-ruling party policy coordination meeting held earlier in the day.

For instance, the government will seek to revise related regulations to reduce the amount of time allowed for delayed payments by e-commerce platforms from the current 60 days, while also requiring them to keep sufficient funds for their delayed payments, according to Choi.

Also, those that issue prepaid e-coupons and gift cards will be required to maintain 100 percent of their issued amount, a move aimed at enabling immediate and full refunds when necessary.

TMON and WeMakePrice are said to have sold massive amounts of gift cards at discounted prices, but no refunds for unused cards or vouchers have been made, partly due to the lack of funds at both the online platforms and issuing companies. (Yonhap)