Department stores agree to lower commission fees

The Fair Trade Commission said Tuesday it reached an agreement with the nation’s top three department stores to lower their commission fees by 3-7 percent immediately for almost half of their small- and medium-sized vendors.

The antitrust regulator expected that 1,054 companies would benefit from the cuts.

Lotte Department Store, the nation’s No. 1 retail chain, will benefit the largest number of companies, 403, or 50.4 percent of its smaller contractors, while Shinsegae and Hyundai will cut commission for 330 and 321 companies, respectively.

“The commission fee rate will decrease from the current 32 percent of wholesale costs to 25 percent on average. We expect smaller vendors will enjoy the benefit directly,” said an FTC official.

The FTC added that units of conglomerates, branches of foreign brands and other companies paying fees of about 20 percent were excluded from the plan.

It took a series of talks with the three leading retailers over the past two months to strike the deal.

Even though their CEOs resisted the cuts citing declining sales, the FTC has pushed ahead with the plan as part of the government’s initiative for shared growth between small and big firms.

In a recent report last month, the FTC said that smaller vendors pay almost 32 percent of their costs in commission fees for using the floor space of the three department stores.

Another survey, however, found that one-third of luxury brands were paying less than 15 percent commission fees while the upper limit did not exceed 25 percent.

“In order to prevent commission cuts from increasing other costs for store renovation and promotional activities, we will continue to monitor the situation on a regular basis,” the official said.

The FTC also plans to complete ongoing talks on commission cuts with three supermarket chains and five home-shopping channels within the month.

Depending on the monitoring results of the commission cuts and their actual benefits, the FTC said it would consider expanding the beneficiary companies.

By Lee Ji-yoon (jylee@heraldcorp.com)