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The Fair Trade Commission imposed a KRW 1 billion fine along with a corrective order on Lotte Hi-Mart, Korea’s largest electronics store. The vendor is alleged to have dispatched more than 14,500 employees to mobilize their own business, such as shop cleaning and parking lot management, and they received a sales incentive of 18.3 billion won, which is not in the contract, and they used it to pay for branch dinners and awards for sales clerks. It is also revealed that Hi-Mart has also delivered 192 million won due to increased logistics costs to suppliers.
Hi-mart sent employees to sell competitive products
According to the FTC on the 2nd, Hi-Mart received 14,540 employees from 31 vendors from January 2015 through June 2018. All employee labor costs were borne by the vendor.
However, Hi-Mart made it possible to sell products from other suppliers to the employees sent by the supplier. For example, a rice cooker manufacturer The job of a company is to sell a company’s rice cookers because the employees sent to Hi-Mart receive a salary from Company A. However, this employee also had to sell competitors’ rice cookers B, C, D and E. Hi Mart even managed their sales targets and performance. Thus, the amount of sales of other vendors’ products by employees dispatched by vendors amounted to 5.5 trillion won. This is more than half of Hi-Mart’s total sales at 50.7%.
It was also investigated that Hi-Mart left dispatched employees with various tasks that should have been contracted for themselves. Representative tasks include issuing membership cards, subscribing to mobile communication services, and subscribing to mutual aid services. A Fair Trade Commission official said: “Hi-Mart regularly mobilized dispatched employees for tasks such as cleaning stores, managing the owner’s window, inspecting inventory and attaching promotional items.”
The FTC explains that such an act violates the Large Scale Distribution Business Act. According to Article 12, paragraph 1, of the Large-Scale Distribution Companies Act, in principle, large-scale distribution companies cannot use the employees of their suppliers by dispatching them. Exceptionally, even if employees are sent, they can only be used for the sale and management of products supplied by the supplier.
Receive money from the vendor and pay for dinner … Passing some of the logistics costs
Hi-Mart is also accused of unfairly receiving sales incentives of 18.3 billion won from 80 vendors from January 2015 to June 2017. Of these, 65 vendors received around 16 billion won on behalf of “ special sales ” and “ reward money, ” and used them for the company’s sales and administration expenses, such as dinner expenses for excellent Hi-Mart stores and awards for excellent employees. The Fair Trade Commission explained that this is a violation of the Large Scale Distribution Business Act, which states that sales incentives can only be paid in advance.
It was investigated that Hi-Mart also left some logistics costs to suppliers. From January to March 2015, Hi Mart applied a maximum 6-month retroactive increase in logistics agency fees to 46 suppliers to avoid their losses when Lotte Logistics (now Lotte Global Logistics) increased their logistics costs. The amount of money unfairly received from the provider was found to be 110 million won. The FTC explained that the same behavior was repeated in February 2016.
Hi Mart is known to have held the position that “I thought it was practice and not a big problem” during the FTC investigation. The Fair Trade Commission said: “Although the degree of violation of the law is very great, we are not willing to improve it in the process of investigation and deliberation,” and said: “We will carefully control whether or not the corrective order is complied with to avoid the same violation of the law. “
Some point out that the level of punishment is lower than for unfair Hi-Mart practices. The Fair Trade Commission said: “Because it is difficult to accurately calculate the number of unfair acts committed by Hi-Mart, it was difficult to calculate the number of violations of the law, so we had to charge only a fixed amount up front “. The Fair Trade Commission will closely monitor whether other unfair acts are not carried out. “
In response, Hi-Mart said, “We have improved the system and strengthened employee training and inspection to ensure this does not happen again.” .
Reporter Seong Soo-young [email protected]
