More than 10% of Electronics, Petroleum Distribution, and Medical Device Dealers Say "Suppliers Decide Selling Prices"

Survey Results on Dealership Transactions in Home Appliances, Petroleum Distribution, and Medical Device Industries

All 3 Industries Agree "Direct Store Transaction Conditions Are More Favorable"
Home Appliances: "Online Selling Prices Higher Than Distributor Supply Prices"
Possibility of Management Interference Such as Prohibition of Distributor Online Sales and Handling of Other Products

Fair Trade Commission to Establish and Publish 'Standard Distributor Contract' This December

[Sejong=Asia Economy Reporter Ju Sang-don] In the three industries of home appliances, petroleum distribution, and medical devices, more than one out of ten distributors reported that the selling price is determined by the supplier. Additionally, over 30% in the home appliances and petroleum distribution sectors viewed the transaction conditions of direct stores as more favorable than those of distributors.

The Fair Trade Commission conducted a survey on distributor transactions targeting the home appliances, petroleum distribution, and medical device industries and announced the analysis results on the 24th.

The survey targeted 219 suppliers and 24,869 distributors subject to the Distributor Act in the home appliances, petroleum distribution, and medical device industries. The response rate was 100.0% for suppliers and 25.0% (6,212 distributors) for distributors.

According to the analysis, all three industries showed a relatively high proportion of distributor transactions among all distribution methods. Home appliances accounted for 57.1%, petroleum distribution 73.0%, and medical devices 74.4%.

Regarding distributor selling prices, in all three industries, distributors often autonomously determined prices. However, a significant portion responded that suppliers set the prices: 12.7% in home appliances, 12.5% in petroleum distribution, and 15.5% in medical devices.

Distributors perceived that direct stores have more favorable transaction conditions across all three industries (home appliances 32.5%, petroleum distribution 32.6%, medical devices 22.1%). Notably, in home appliances, 34% responded that online selling prices are lower than distributor supply prices.

More than 80% in all three industries reported no experience of unfair practices. However, in home appliances, there were indications of possible management interference such as ▲prohibition of distributor online sales (25.5%) and ▲requests for client information (8.4%). In petroleum distribution, there were possibilities of management interference such as ▲forced sales targets with unfavorable changes in payment terms if targets are not met and ▲supply conditioned on prohibition of handling other business operators’ products. In medical devices, possible management interference included ▲explicit or implicit demands for distributor selling price information (14.6%) and ▲setting distributor sales territories with sanctions for violations (32.4%).

Distributors cited the need for system improvements and difficulties such as establishing remedies for damages when multiple or similar damages occur, introducing clauses prohibiting infringement of sales territories, and support for distributor transaction education and legal assistance. Regarding the standard contract, all three industries showed more responses favoring its necessity (home appliances 48.5%, petroleum distribution 47.4%, medical devices 39.7%) than those opposing it (13.9%, 9.7%, 15.1%). The most frequently cited difficulty due to the recent COVID-19 pandemic was "burden from delayed payments and increased interest charges."

Based on the survey results, the Fair Trade Commission plans to establish and publish a standard distributor contract around December this year after collecting opinions from suppliers and distributor organizations. A Fair Trade Commission official stated, "We plan to conduct ex officio investigations into suspected legal violations found in the survey results and correct unfair trade practices. We will also strive to promptly institutionalize industry demands identified in the survey, such as effective remedies for distributor damages and legal and educational support related to distributors."

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