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The North Face’s reign at risk

Hit with biggest-ever fine, U.S. outdoor brand to take legal  action against FTC


The U.S. outdoor brand that has dominated the South Korean market for years is at risk of losing its position after it was hit with a record fine.

The nation’s antitrust watchdog hit The North Face Korea last week with a 5.2 billion won ($4.6 million) fine for compelling all 151 of its retailers here to charge 10 to 15 percent higher prices than for rival brands since 1997 to maintain the brand’s premium image.

The Fair Trade Commission said that the unfair practices of the brand with over 30 percent market share also affected rival companies such as Kolon Sports, K2 and Columbia. Korean consumers also had to pay 50 percent more for the brand’s down jacket due to the price-fixing, according to Seoul Young Men’s Christian Association. 
The North Face shop in Myeong-dong, central Seoul. (The Korea Herald)
The North Face shop in Myeong-dong, central Seoul. (The Korea Herald)

Goldwin Korea, the exclusive importer of the American brand, however, immediately announced plans to take legal action against the FTC.

The importer argued that the size of the fine is inappropriate as it did not stop its sales outlets from having discount sales, and The North Face Korea’s market share is about 15 percent, not over 30 percent as the FTC claims.

“Our company plans to review the matter legally in cooperation with a law firm,” said Goldwin Korea through a statement.

Hit with the biggest-ever fine imposed by the FTC and stepping into a possibly drawn-out legal dispute, though, market insiders expect that the outdoor brand may lose its top position in the market.

Buoyed by the explosive growth of the local outdoor industry which became a 3 trillion won market here, The North Face soon positioned itself as the market leader. It marked annual revenue of over 600 billion won last year, the most for a single outdoor brand here.

The market leader’s high-price-no-discount policy has been, in fact, well known among consumers. Word spread that if a shop sells The North Face jackets at discount prices, they are likely fakes. The high price policy of the brand, like that of no-sale luxury brands like Chanel or Hermes, is in fact considered to have played a part in stirring up the “North Face craze” last year.

The brand was immensely popular last winter, especially among teenagers, to the point that it was referred to as the “second school uniform.” The jackets were nicknamed “spine breakers,” for squeezing money out of parents trying to appease nagging kids.

The brand was so coveted by teens that it played a role in school bullying. The jackets signified hierarchy. The most expensive Himalayan down jackets starting at 700,000 won were owned by the most popular ― or the most powerful ― kids while the 250,000 won Nuptse 2 were worn by the “losers.” Wearing the cheapest jacket, however, was considered better than wearing another brand.

“The fine is not at all too much regarding how the brand, a.k.a. ‘spine breaker,’ brought out numerous social problems like school violence, money extortion, distorted sense of class distinction, household burdens and the long-term unfair businesses it practiced,” said Seoul YMCA through a statement.

“The North Face is talking about legal actions although its wrongful conduct is evident in the contracts it concluded with sales outlets. We urge the FTC to strictly deal with the administrative litigation that could follow,” it said.

By Park Min-young  (claire@heraldcorp.com)
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