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Korean hypermarket giants slapped with W24b fine

Korea’s top three hypermarket chains were slapped with a combined record-high fine of 23.89 billion won ($20.2 million) by the nation's antitrust agency Wednesday for violations of retail transaction regulations.

Homeplus, E-mart and Lotte Mart were fined for failing to comply with orders to correct practices such as unilateral deductions on payments made to suppliers, unpaid use of supplier employee labor, unfair division of labor costs, among other actions, the Fair Trade Commission said in a statement.

Kim Jae-shin, general director of the FTC’s business trade policy bureau, speaks during a press conference in Sejong on Wednesday. (Yonhap)
Kim Jae-shin, general director of the FTC’s business trade policy bureau, speaks during a press conference in Sejong on Wednesday. (Yonhap)

It is the biggest lump-sum fine the commission has issued for a violation of the Act on Fair Transactions in Large Franchises and Retail Business since the law went into effect in 2012.

“We reached this decision after looking into a number of common unfair practices and mistreatment experienced by many suppliers to the big supermarkets,” the FTC said.

Among the three, Homeplus is subject to the largest fine of 22 billion won for continuously causing direct financial damage to its suppliers, according to the agency’s order.

The charges include unfairly leaving out 12.1 billion won from payments to four contracted supplier, as well as hiring promotional employees and then making up for some 16.8 billion won in additional labor costs by charging its suppliers for “in-store advertising services.

Given the gravity of the violations, the antitrust watchdog said it has decided to refer Homeplus to prosecutors, with plans to finish the process before July.

It marks the first time that the FTC is suing a company for failing to comply with the large franchise and retail business act, it said.

Meanwhile, E-mart was fined 1 billion won and Lotte Mart 858 million won for contract violations, returning suppliers’ products past the specified return date and making use of the suppliers’ employees without legal grounds, among others.

“These fines recognize in particular the illegality of various industry practices that attempt to sidestep existing regulations,” the FTC said.

By Sohn Ji-young (jys@heraldcorp.com)
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