Luxury brands probed over commission charges: FTC

The Fair Trade Commission said Tuesday that it has launched an investigation into major local and foreign brands sold at the so-called “Big Three” department stores in the nation.

The probe started as part of the antitrust regulator’s determination to root out unfair business activities in the retail industry such as high commission fees charged to smaller businesses.

Despite their tentative agreement on shared growth efforts, related talks between the government and retailers have been stalled for almost one month.
The FTC dispatched investigators to the office buildings of eight brands including Louis Vuitton, Chanel, Gucci, Cartier, Amore Pacific, Cheil Industries, LG Fashion and MCM.

“It’s true that we have launched an investigation into local and foreign brands sold at department stores since yesterday,” said a FTC official. “We are looking into the detailed transactions between them.”

Smaller traders have complained that major retailers have charged high commission fees, about 30-40 percent of wholesale costs, compared to the industry norm of 20-25 percent.

But luxury brands are believed to have paid almost no commission fees as their location helps department stores show a premium image.

According to the FTC, the investigation was focused on the commission fees that the luxury brands have actually paid and other maintenance costs that they shared with retailers.

The FTC plans to decide whether to expand the investigation into other brands based on the first results.

In a separate probe, the agency said it will select 5-10 percent of items from smaller and medium-sized businesses and look into the commission fees that they pay and other contract conditions.

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