Investigation into Unfair Trade Practices in Furniture, Book Publishing, and Boiler Dealerships

Unilateral Promotions and Costs Borne by Dealers
Fair Trade Commission "Distributes Standard Contracts Reflecting Industry-Specific Transaction Realities"

Jongwook Cho, Chairman of the Fair Trade Commission. (Photo by Yonhap News)

[Asia Economy Reporter Moon Chaeseok]

Furniture supplier A conducted a promotional event without prior consent from the dealership and then passed the costs onto the dealership.

Publishing company B designated the sales territories of wholesale bookstores and imposed sanctions if violated.

Boiler company C entered into exclusive contracts with dealerships and imposed disadvantages if sales targets were not met.

The Fair Trade Commission is conducting a written survey to minimize recurrence of such cases detected in dealership transactions in the furniture, book publishing, and boiler industries. The survey will be conducted through websites, mobile applications, and also include visits to dealerships. This is an annual survey conducted under Article 27-2 of the Dealer Act, running from the 7th to the 31st of this month, with results to be announced in September. In October, a standard dealership contract will be established and distributed.

This survey targets 40 suppliers and approximately 6,500 dealerships, examining general status by industry, dealership transaction status and methods, experiences of unfair trade practices, difficulties, and areas needing improvement.

First, the survey investigates dealership transaction status such as the proportion of exclusive transactions by industry, resale and consignment sales ratios, and price determination structures. It also checks specific transaction methods including contracts, orders, returns, settlements, and whether computerized systems are implemented throughout the dealership transaction process.

Additionally, it examines experiences and potential occurrences of violations of the Dealer Act such as forced purchases, coercion to provide benefits, forced sales targets, imposition of disadvantages, management interference, refusal or avoidance of order detail verification requests, and retaliatory measures.

Notably, this survey includes the difficulties faced by dealerships due to the spread of the novel coronavirus disease (COVID-19) and the current support status and plans of suppliers. The Fair Trade Commission aims to prepare fair risk-sharing standards that can be used between suppliers and dealerships in case of crises such as typhoons, floods, fires, and quarantine measures. For example, the standard dealership contract will include provisions prohibiting the imposition of late fees if dealerships fail to meet payment deadlines due to force majeure.

The survey results will be analyzed reflecting dealership transaction status and industry-specific characteristics, with results scheduled for announcement in September. Based on the results, the standard dealership contract will be established and distributed in October. Any suspected violations will be inspected and corrected through ex officio investigations. This year, in addition to the three industries, surveys will also be conducted on home appliances, petroleum distribution, and medical devices.

Suk Dong-su, head of the Dealership Transaction Division at the Fair Trade Commission, said, "Through this survey, we will prepare a standard dealership contract that serves as a model contract between suppliers and dealerships, which will practically help eradicate unfair trade practices in dealerships." According to the 2018 dealership transaction survey, dealerships using the standard contract had a 3 to 4 times lower rate of experiencing unfair trade practices compared to those not using it.

The Fair Trade Commission sees the need to establish soft norms that encourage voluntary improvement of trading practices as online transactions and non-face-to-face transactions such as home shopping become more active. Therefore, since 2018, after conducting dealership transaction surveys in six industries?clothing, food and beverage, telecommunications, pharmaceuticals, automobile sales, and automobile parts?it has been preparing industry-specific standard dealership contracts.

This content was produced with the assistance of AI translation services.