Since its launch in 1995, television home shopping has grown as a solid, lucrative retail platform, with the market reaching 9 trillion won. Sadly, a filthy side to the business environment in the industry has also steadily grown.
There are so many entrenched foul business practices in the industry that the nation’s antitrust watchdog called them “a comprehensive assortment of irregularities.”
For the irregularities, mostly cases of six TV home shopping firms abusing their power against vendors, the Fair Trade Commission slapped them with 14.4 billion won ($13 million) in fines. CJ O Shopping led the list with 4.6 billion. NS Mall was given the smallest at 390 million won.
A look at the FTC list of unfair business practices shows that the six firms were simply bullies and rogues exploiting their superior business positions over the vendors who sell their products and services on the television channels. The poor vendors, most of them small and medium-sized enterprises, were helpless.
In many cases, the home shopping firms did not even sign contracts with vendors or ignored them even if there were agreements.
As a result, 146 vendors for CJ O Shopping had to shoulder 99.8 percent of the sales promotion expenses. According to the law, the proportion should not exceed 50 percent, but the company forced vendors to pay for studios, models and even the operation of the automated interactive ARS phone system.
It was common for the channels to arbitrarily change or cancel air time. They also charged higher commissions than previously agreed if sales fell short of targets and delayed payments to vendors, without paying the interest incurred by the delay.
Ridiculously, the home shopping channels demanded vendors provide information about business deals they did with other firms ― perhaps knowing that their rivals would do the same.
In announcing the fines, the FTC said in a statement that the punishment would send “a clear message” to the sector and more broadly to the retail industry that it would not tolerate unfair business practices.
But the FTC may first have to answer questions about whether the fines were harsh enough to be a clear message to those who have long been accustomed to bullying and why it has not exercised its right to ask the prosecution to investigate the cases for possible criminal charges.
We raise this issue because government officials have done little to address the problems after major corruption cases hit the industry in recent years: Last year, executives and employees of Lotte Homeshopping went to jail for receiving kickbacks from vendors, and in 2012 employees of four firms were charged with bribery.
