Nonghyup Hanaro Mart Embezzled Incentives Without Providing Supplier Contracts... Fined 780 Million Won

Fair Trade Commission: "NongHyup Hanaro Mart, Unfair Use of Employees and Improper Receipt of Performance Incentives"

[Asia Economy Reporter Moon Chaeseok] The Fair Trade Commission announced on the 25th that it has decided to issue corrective orders and impose fines totaling 780 million KRW on Nonghyup Hanaro Distribution and Nonghyup Distribution for conducting transactions without providing contracts to suppliers and collecting money from suppliers unrelated to product sales promotion.

Contracting with suppliers without providing contracts... "Violation of the Large-scale Distribution Business Act"

Source=Korea Fair Trade Commission

According to the Fair Trade Commission, Nonghyup Hanaro Distribution, a distribution subsidiary of the Nonghyup Central Association, did not provide contracts before signing 744 purchase supply agreements with 633 suppliers from January 2017 to April 2018.

They failed to deliver contracts containing transaction types, items, periods, and signatures or seals of both parties before starting the transactions.

Nonghyup Distribution also did not provide contract documents by the start date of transactions while signing 223 direct purchase and special purchase agreements with 130 suppliers from December 2015 to May 2018.

The Fair Trade Commission stated that these actions violate Article 6, Paragraphs 1 and 2 of the Large-scale Distribution Business Act.

Employing supplier employees without agreements on labor cost sharing, etc.

Source=Korea Fair Trade Commission

These companies dispatched and employed supplier employees without writing essential agreements such as labor cost sharing and working conditions.

Nonghyup Hanaro Distribution received one employee each from 15 suppliers and had them work at its Seoul Sinchon branch from April 2015 to May 2018, without concluding agreements containing essential terms.

Nonghyup Distribution also received a total of 276 employees from 54 suppliers and had them work at its business sites from January 2015 to October 2017, without obtaining voluntary employee dispatch requests from suppliers or concluding agreements including essential terms.

The Fair Trade Commission explained that these acts violate Article 12, Paragraphs 1 and 2 of the law.

Collected 2.21 billion KRW as basic incentives unrelated to product sales promotion

Source=Korea Fair Trade Commission

Nonghyup Hanaro Distribution also collected over 2.2 billion KRW from suppliers under the name of basic incentives unrelated to product sales promotion.

According to the Fair Trade Commission, the company received 2.212 billion KRW as performance incentives from suppliers who changed their delivery method from direct delivery to the company's stores to delivery via the company's distribution.

The Fair Trade Commission judged that such incentives have little relevance to sales promotion purposes. They regarded it as economic benefits of a "basic incentive" nature, which does not fall under the "sales incentives" specified in Article 2, Clause 9 of the law, thus violating Article 15.

A Fair Trade Commission official explained, "Performance incentives are a type of sales incentive given when the supplier's direct purchase transaction amount (compared to the same period last year) reaches a target. However, the incentives received by Nonghyup Hanaro Distribution were given at a fixed rate of 1.5%, regardless of the previous year's sales performance or growth targets."

"Nonghyup distribution affiliates promise to improve supplier transaction systems"

Source=Korea Fair Trade Commission

The Fair Trade Commission announced that it has decided to issue corrective orders (including notification orders) and impose a total fine of 780 million KRW on Nonghyup Hanaro Distribution and Nonghyup Distribution to prevent recurrence of such unfair practices.

Nonghyup Hanaro Distribution will receive corrective orders (including recurrence prevention and notification orders) and a fine of 600 million KRW, while Nonghyup Distribution will receive corrective orders (including recurrence prevention and notification orders) and a fine of 180 million KRW.

Kwon Soon-guk, head of the Distribution Transaction Division at the Fair Trade Commission, said, "This case not only involves sanctions such as fines but also secured promises from the violating businesses to improve their transaction systems to prevent recurrence and protect suppliers. We expect the rights and interests of suppliers dealing with these companies to improve."

Kwon added, "Considering the difficulties faced by the distribution industry due to the recent COVID-19 pandemic, we plan to strengthen monitoring activities against chronic unfair trade practices such as 'unjust collection of sales incentives' and 'improper use of employees' by large-scale distributors."

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