Daiso Caught for Unfair Returns Worth 1.6 Billion KRW... 500 Million KRW Fine Imposed

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[Asia Economy Reporter Moon Chaeseok] Asung Daiso, a specialty store selling household goods at uniform prices, was caught by the Fair Trade Commission for unfair returns amounting to 1.6 billion KRW.

The Fair Trade Commission announced that from January 2015 to July 2017, Daiso unfairly returned 2.12 million products of 1,405 items supplied by 113 suppliers through a 'direct purchase transaction' method and decided to impose a fine of 500 million KRW. A fine of 1.5 million KRW was also imposed for failure to retain documents.

Direct purchase transactions refer to transactions where large-scale retailers directly purchase products from suppliers and bear the inventory risk of products not sold to consumers themselves. This differs from 'special purchase transactions,' where products not sold to consumers are purchased on credit with a return condition.

The Fair Trade Commission stated that among the products unfairly returned by Daiso, 1,251 items from 92 suppliers (return amount about 800 million KRW) were returned without the suppliers' voluntary request letters, and all costs were shifted to the suppliers.

Such actions were judged to violate Article 10, Paragraph 1, Subparagraph 7 of the Large-Scale Distribution Business Act. According to the law, returns are only permitted when the supplier voluntarily requests returns in writing, acknowledging that the return is beneficial.

Unfair returns related to seasonal products sold during Christmas (greeting cards, Santa socks, etc.) and Pepero Day (Pepero gift sets) were also detected.

The Fair Trade Commission reported that Daiso returned leftover seasonal products from 21 suppliers, 154 items (purchase amount about 800 million KRW), after the season ended, without agreeing on specific return conditions, and at the suppliers' expense.

These actions violate Article 10, Paragraph 1, Subparagraph 6 of the Large-Scale Distribution Business Act. According to the law, return conditions for seasonal products must be specifically agreed upon and returns must be made according to the agreed written terms.

Seasonal products refer to items sold intensively during certain periods or seasons, such as commemorative day products, holiday products, vacation products, and seasonal products.

Failure to retain documents was also discovered. Daiso did not retain the annual basic contract documents on product supply transaction conditions concluded with 12 suppliers.

This violates Article 6, Paragraph 8 of the Large-Scale Distribution Business Act. According to the law, contract documents with suppliers must be retained for five years from the contract termination date.

A Fair Trade Commission official said, "This action corrects the unfair return issue of Daiso, the largest domestic specialty store for household goods and a major distribution channel for small and medium suppliers," and added, "It is expected to help alleviate the burden of return costs for small and medium household goods manufacturers and suppliers."

He added, "We will continue to actively monitor large-scale retailers who purchase products from suppliers and unfairly return them, shifting inventory burdens to suppliers."

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