E-Mart under scrutiny

E-Mart’s headquarters was recently raided by fair trade investigators over allegations that the company dishonored its promise to reduce sales commissions imposed on small suppliers. The Fair Trade Commission said it will tighten monitoring of retail giants to root out unfair practices that have hurt small suppliers. / Korea Times

Fair Trade Commission (FTC) investigators raided the Seoul headquarters of E-Mart, the country’s largest grocery chain, Monday, on suspicions over whether the retail giant dishonored its promise to reduce sales commissions imposed on small suppliers.

E-Mart officials confirmed Tuesday that 16 FTC inspectors visited the company’s offices a day earlier in search of documents and computer files. FTC representatives declined to comment in detail about the investigation.

E-Mart was among 11 major retailers, including department stores and television shopping channels, which succumbed to pressure from the FTC last year and agreed to cut their sales commissions on small-and-medium-sized companies by 3 to 7 percent.

In recent years, the FTC has been used as an unorthodox tool for the government’s economic policy using the threat of anti-trust investigations to stop companies raising the prices of their products and protecting small firms and merchants from the brute strength of big businesses.

It appears that the government is going up a gear in its “shared growth’’ initiative between large and small firms as it looks to curry favor with voters ahead of the Dec. 19 presidential election.

Market sources suspect that E-Mart tried to make up for the cut in commission rates by charging small providers larger commissions on special promotional events.

The FTC announced a “mid-term review’’ about the effectiveness of the commission cuts, Tuesday, which it believes has improved the revenue of 2,270 suppliers by a combined 35.8 billion won (about $33.7 million) since September. The decision to time the E-Mart investigation close to the press conference was interpreted by some as the anti-trust watchdog pressuring retailers to make further cuts in their commissions.

The country’s three major department stores ㅡ Lotte, Shinsegae and Hyundai ㅡ have slashed commission worth 18.5 billion won at their three largest discount mall chains (E-Mart, Home plus, and Lotte Mart), and 4.3 billion won for five television shopping channels.

The FTC expressed gratitude to major retailers for their voluntary cooperation with the commission cuts, but added there is still a long way to go. It said many retailers were suspected of having ignored their promises regarding commission cuts or given the benefit to companies with smaller sales volumes.

“Companies benefiting from the commission cut were mostly small, which means major retailers have selectively given the benefit to companies with a small trade volume,” an FTC official said.

The FTC openly vented its frustration over the retailers’ past- the-deadline presentation of their policy shift regarding sales commission with even ill-prepared contents.

“Most retailers subject to the cut submitted related data later than the deadline and their data were biased to a great extent,” the official said.

The FTC will intensify monitoring on sales commissions at giant retail stores and formally ask for additional cuts. It also plans to conduct on-site inspections to root out practices that have victimized small tent firms.

It will unveil a package of measures at the end of the year intended to stamp out “all types of unfair practices” in the country’s retail industry. <The Korea Times/Park Si-soo>

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