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FTC chair urges retail industry to reform

Fair trade agency will not tolerate large firms bullying suppliers
Sept 07,2017
Fair Trade Commission Chairman Kim Sang-jo, left, speaks with heads of retail industry lobbying groups at the Korea Chamber of Commerce and Industries’ headquarters in central Seoul on Wednesday. [YONHAP]
The chairman of Korea’s fair trade regulator doubled down on his promise to reform the retail industry on Wednesday in front of heads of the industry’s lobbying groups, telling them that the regulatory agency would not back down from meting out harsher punishment against conglomerates that engage in unfair business practices.

“The retail industry, too, is not free from the controversy of larger companies forcing their smaller partners to engage in unfair work,” Kim Sang-jo, chairman of the Fair Trade Commission, said during the meeting with heads of retail industry lobbying groups at the Korea Chamber of Commerce and Industry’s headquarters in central Seoul.

The liberal government under President Moon Jae-in has been keen on enacting policies that protect small and medium-sized businesses from bullying by conglomerates. Many smaller companies in Korea depend on large companies for business and contracts, and this leads some conglomerates to wield their influence by forcing smaller companies to eat up costs or perform work that should be done at the top.

Last month, the Fair Trade Commission announced its intention to raise penalties against major retailers that are caught taking advantage of their small suppliers. Under the current rules, depending on the severity of the case, the Fair Trade Commission imposes a penalty equivalent to 30 to 70 percent of the gains made from the malpractice. Under new rules to go into effect next month, the rate will double to 60 to 140 percent.

The commission has also given discount retail chains and online shopping platforms to the end of this year to publicly disclose the commission that they charge suppliers. Currently, only department stores and home shopping networks are obligated to disclose these numbers. The move is meant to help suppliers compare the rates charged by different retailers.

“Major retailers with large purchasing power through discount supermarkets, department stores and home shopping channels have been passing on various costs and risks to suppliers,” Kim said. “We have prepared the measures with the conclusion that under current laws and regulations, it will be difficult to resolve these fundamental problems.”

Kim, who has developed a reputation for being anti-conglomerate, asked the retail industry to cooperate with the government’s efforts. “I am well aware that you feel significant burden from the recent measure,” he told the lobbyists. “However, while it would be painful at this moment, if we create a fair market by changing past practices, it will be a huge benefit for our retail industry.

“I will proceed with a strong will of new reform and not back down,” he said.

The chairman acknowledged that while the government could regulate practices in the industry, it could only go so far on its own, saying large companies themselves should voluntarily pursue changes by seeking ways to better cooperate with their small counterparts.

“The major retailers and suppliers should work together in order to create a cooperative model where both can improve,” he said. “I ask the retail industry not to look at the company’s own or industry’s own interest and to work with the government as a partner in reform with a view on the industry as a whole.”

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]