'Initiation of Public Consultation on Namyang Dairy's Tentative Consent Resolution... Includes Strengthening Prior Consultation with Dealerships and Sharing Operating Profits'

Final Plan to Be Confirmed After 40 Days of Deliberation Until the 22nd of Next Month

Consent Decision System Procedure.

[Asia Economy Reporter Joo Sang-don] The Fair Trade Commission announced on the 13th that it will collect opinions on the provisional consent decree regarding Namyang Dairy Products' abuse of superior bargaining position from the 14th to February 22.

The Fair Trade Commission had been reviewing the case where Namyang Dairy Products lowered the commission rate paid to Nonghyup consignment transaction agencies without sufficient consultation, effective January 1, 2016. In response, Namyang Dairy Products applied for the commencement of the consent decree procedure on July 26 last year, and the Fair Trade Commission initiated the consent decree procedure on November 13 of the same year.

The consent decree system is a mechanism that allows for the swift conclusion of a case without confirming legal violations if the corrective measures proposed by the business operator are deemed reasonable.

The Fair Trade Commission reviewed the effectiveness and implementation methods of the damage relief measures for agencies, transaction order improvement plans, and welfare enhancement plans for agencies proposed by Namyang Dairy Products and conveyed its opinions to Namyang Dairy Products. Namyang Dairy Products then supplemented the corrective measures reflecting these opinions.

The provisional consent decree from Namyang Dairy Products includes ▲guaranteeing the right of agencies to form associations ▲strengthening prior consultation with individual agencies and agency groups when changing important transaction conditions ▲sharing net operating profits with agencies.

First, Namyang Dairy Products decided to maintain the Nonghyup consignment commission rate above the industry average to prevent unilateral commission reductions. To this end, it will annually commission a reputable market research or credit rating agency to investigate the Nonghyup consignment commission rates of peer companies, and if Namyang Dairy Products' commission rate is lower than the industry average, it will adjust it to at least the average. Additionally, for agencies trading with Nonghyup Hanaro Marts located in island regions or with low monthly sales, currently numbering 148, additional consignment commissions will be paid for those transactions.

The provisional consent decree also includes transaction order improvement measures. Namyang Dairy Products will sign a "Namyang Dairy Products Agency Win-Win Agreement" with agencies containing provisions that "agencies may freely join and participate in agency councils, and Namyang Dairy Products will not disadvantage agencies for joining or participating in the agency council." Furthermore, when changing important conditions stipulated in agency contracts, in addition to obtaining prior written consent from each agency, a prior consultation process will be conducted at a win-win committee attended by representatives of the agency council and Namyang Dairy Products' CEO. Namyang Dairy Products will also support the activities of the agency council by providing 2 million KRW monthly activity expenses for five years.

To enhance agency welfare, Namyang Dairy Products will share 5% of the operating profits generated from Nonghyup consignment delivery transactions with the Nonghyup consignment delivery agencies. Even if business conditions deteriorate and operating profits fall below 2 billion KRW, Namyang Dairy Products will guarantee a minimum of 100 million KRW as cooperative profits. Additionally, it will operate systems such as ▲interest-free emergency living funds support in case of disability of agency owners ▲scholarships for children attending university ▲provision of childcare products for children and grandchildren ▲long-term operating agency reward programs.

The provisional consent decree of Namyang Dairy Products will be announced on the Fair Trade Commission's website. Anyone can submit opinions in writing. The final consent decree will be submitted within 14 days after the opinion collection period expires. It will then be finalized after review and resolution by the Fair Trade Commission.

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