South Korea’s CU fined US$1.4 million for unfair trading
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South Korean convenience-store operator BGF Retail has been fined for pushing exorbitant sales promotion costs onto its suppliers.
The firm was ordered to pay KRW1.67 billion (US$1.4 million) for its breach of the Act on Fair Transactions in Large Retail Business, according to a report in The Korea Times.
While the act forbids any retailer from forcing its supplier to shoulder more than half of any promotional cost, BGF was found to have run “two-for-one” promotional events from early 2014 to late 2016 at its CU-branded stores and passed on the majority of expenses.
The firm pushed KRW2.39 billion ($2 million) in costs on 79 suppliers to pay for 338 promotions conducted during the period at more than 13,000 CU locations. It also failed to sign written agreements with suppliers prior to holding sales events in 76 cases.
“This is the first time that the FTC has punished a company for forcing suppliers to shoulder more than 50 percent of the cost for two-for-one events,” said an official at Korea’s Fair Trade Commission. “The FTC will enhance monitoring and punishments for similar violations.”
CU is currently in second place among Korea’s leading convenience store chains, with a 31.14 percent market share.
Questions & Answers
Q.What specific actions led to BGF Retail being fined by the authorities?
What specific actions led to BGF Retail being fined by the authorities?
BGF Retail was fined for forcing 79 suppliers to cover the majority of costs for 338 'two-for-one' promotions at its CU stores. The firm also failed to sign written agreements with suppliers before holding sales events in 76 instances.
Q.How much was BGF Retail fined, and what was the total cost it pushed onto its suppliers?
How much was BGF Retail fined, and what was the total cost it pushed onto its suppliers?
BGF Retail was fined KRW1.67 billion (US$1.4 million). The company pushed KRW2.39 billion (US$2 million) in promotional costs onto its 79 suppliers across its 13,000-plus CU locations.
Q.What is the specific legal threshold for promotional cost sharing that BGF Retail breached?
What is the specific legal threshold for promotional cost sharing that BGF Retail breached?
The Act on Fair Transactions in Large Retail Business forbids retailers from making suppliers shoulder more than half of any promotional cost. BGF Retail was found to have passed on the majority of expenses, thus breaching this act.
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