FTC, retailers in discord over shared growth

Major department stores on Friday expressed concerns about antitrust authorities’ inspections into their shared-growth efforts with smaller businesses that could start as early as on Oct. 4.

Early last month, the Fair Trade Commission reached an agreement with 12 department stores, supermarket chains and home-shopping channels to lower their commission fees by 3 to 7 percent from October.

Starting with the nation’s top three department store chains ― Lotte, Hyundai and Shinsegae ― the antitrust regulator plans to evaluate the fulfillment of the agreement at individual companies.

However, department stores complained that the follow-up discussions on detailed plans have not been smooth with their opinions not reflected properly during the process.

“During the discussions on detailed steps to implement the agreement, the FTC demanded to offer 10 percent of operating profits,” a department store official said.

“Because that’s unacceptable, it would be difficult to enforce the shared-growth initiative starting in October.”

According to industry sources, the FTC requested Lotte Department Store, the No. 1 retail chain, to “share” 10 percent of its last year’s operating profits totaling 749.8 billion won ($637.8 million). But they could not reach an agreement.

The regulator seems to have made similar demands to Hyundai and Shinsegae, sources said.

Department stores said they would not carry out the agreement and have no choice but to comply with the potential investigation due this month.

However, the FTC denied on Friday any speculation that the antitrust regulator would exercise its authority to monitor shared growth efforts of the retail giants.

“As we have already said several times, we will do in-depth interviews with smaller businesses regarding the commission fees that they pay to large department stores and analyze the amount paid by luxury brands,” the FTC said in a statement.

“We have no plan to launch an investigation exercising our authority.”

The FTC also made it clear that it had not requested “10 percent of operating profits,” saying, “We just looked into the impact of commission cuts in their operating profits.”

The FTC added that there was no problem with starting the shared-growth initiative this month as planned even though it would take time to decide the items subject to commission cuts and the range of benefits with retailers.

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