NongHyup unit fined $330,000 for unfair supplier fees

NongHyup Hanaro Distribution, which operates 24 large and medium-sized Hanaro Marts across South Korea, has been ordered to pay a fine of 460 million won (approximately $330,000 USD) by the Fair Trade Commission (FTC) for engaging in unfair trade practices with its suppliers.

The company was found to have charged suppliers 'new product entry fees' for items that were not considered new. Specifically, from February to November 2021, NongHyup Hanaro Distribution collected a total of 323.6 million won from 43 suppliers for 187 products that had been on the market for over six months, thus disqualifying them as 'new products' under standard definitions. The company had set its own criteria, defining 'new' as simply being newly stocked in Hanaro Mart, regardless of the actual market release date. This practice led to products that were up to eight years and nine months old being subjected to these entry fees, a practice the FTC deemed beyond reasonable limits.

In addition to the improper fees, the FTC also cited NongHyup Hanaro Distribution for violations related to sales promotion personnel and contract documentation. Between April 2021 and January 2024, the company received 43 sales promoters from 10 suppliers to work in its stores. However, it failed to adhere to the legal requirement of establishing written agreements detailing the number of staff, their working periods, and hours beforehand. Furthermore, from January 2021 to July 2024, the company delayed providing contract documents to 426 suppliers and vendors for 863 supply and lease agreements, failing to specify crucial details such as transaction type, product items, and contract duration.