'Exemption from Large Retailers' Obligation to Share Discount Event Costs'... Extended Until the End of This Year

Fair Trade Commission Extends Promotion Event Guideline Application Period by One Year
Not Applicable When Suppliers Autonomously Decide on 'Event Participation and Discount Rates'

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[Sejong=Asia Economy Reporter Ju Sang-don] When suppliers autonomously decide on key elements related to promotion events such as event participation, items, and discount rates, it is regarded as a voluntary event by the supplier, and the 'obligation for large retailers to bear more than 50% of promotion costs' is not applied. The application period of the 'Promotion Event Guideline' that exempts this obligation has been extended until the end of this year.

On the 14th, the Fair Trade Commission (FTC) announced that it has decided to extend the application period of the 'Promotion Event Guideline,' which has been in operation since June 2020, by one more year.

Under the current Distribution Industry Development Act, when a large-scale retailer conducts a promotion event alone or jointly with a supplier, the retailer is required to bear more than 50% of the promotion costs. However, it is stipulated that the obligation to share 50% of the promotion costs does not apply in cases of 'differentiated events voluntarily requested by suppliers.'

However, in June 2020, as consumption shrank due to COVID-19, suppliers and retailers requested a relaxation of the application of the Large-Scale Retail Business Act, stating that 'it is urgent to clear inventory and increase sales through large-scale discount events.'

In response, the FTC discussed with suppliers and retailers and established and implemented the Promotion Event Guideline. According to the guideline, when suppliers autonomously decide on key elements related to promotion events such as event participation, items, and discount rates, it is regarded as a voluntary event by the supplier, and the retailer’s obligation to bear more than 50% of the promotion costs is not applied.

The application period of the guideline was extended by one year in December 2020 at the request of suppliers and retailers due to the expiration of the initial period. This time, it has been extended again, postponing the guideline application period until the end of this year.

Following the decision to extend the guideline by one year, the FTC also extended the application period of the guideline in the 'Special Purchase Review Guidelines' and 'Online Shopping Mall Review Guidelines' addenda until December 31, 2022.

An FTC official said, "By deciding to extend this guideline, retailers plan to support win-win measures for suppliers, such as lowering sales commissions and early payment of funds, just like last year," adding, "Through this, it is expected to greatly contribute to clearing inventory and overcoming liquidity crises for small and medium-sized suppliers who are experiencing great difficulties due to COVID-19."

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