Chanel faces fair-trade hurdles in South Korea

French luxury label Chanel is under investigation for alleged breaches of South Korea’s Free Trade Act.

The Korean Free Trade Commission (KFTC) is looking into allegations that the firm is placing unfair restrictions on duty-free operators distributing its products to local retailers. Korean law has recently relaxed restrictions on how duty-free companies can sell and distribute stock following the heavy impact of the coronavirus pandemic on the industry. The previous regulations restricted duty-free companies from passing stock and inventory to local retailers.

The French group however is refusing to allow its products to be sold at potentially reduced prices.

“If a firm does not allow a business partner to sell its products at a certain price and threatens to cut supplies or impose a penalty in any future business relations, this is a contravention of the Fair Trade Act,” a KFTC official said.

“If Chanel violates the act, then we can bring a case for possible judicial review and apply administrative actions, accordingly, from imposing fines through to issuing a correction order or even prosecuting the brand, in the worst-case scenario.”

Customer levels have reduced 85.7 percent since the outbreak, with sales halving from KRW2.17 trillion (US$1.76 billion) down to KRW1.08 trillion ($885 million).