Large online shopping malls, up to 500 million penalties for passing advertisement expenses to suppliers

Starting in February, if a large online shopping mall is caught overpaying advertising or server fees to suppliers, they will have to pay a fine of up to 500 million won.

According to the Fair Trade Commission on the 31st, the enactment of the’Guidelines for Examining Unfair Trade Behavior of Online Shopping Mall Businesses’ will be implemented from February.

This guideline targets online shopping malls with annual sales of 100 billion won or more. Instead of this guideline, online platform companies such as Naver are subject to the Online Platform Fairness Act promoted by the Fair Trade Commission.

In this guideline,’receiving money in the name of advertising expenses and server expenses’ was added as an unfair transaction of online shopping malls. Under the current large-scale distribution industry law, online shopping malls are not allowed to demand economic benefits from suppliers, except in cases where sales incentives are set in advance. It also banned requests for donations and sponsorships.

It is a legal sales incentive for online shopping malls, which is related to sales promotion, and is defined as a case of benefit to suppliers.

In case of violation of the law, the Fair Trade Commission decided to impose a fine within the range of not exceeding 500 million won in case it is difficult to calculate the sales amount. Currently, it is possible to impose penalties within the delivery price of shopping malls or annual rental fees.

There were also additional types of violations related to the prohibition of improper returns, transfer of sales promotion costs, and demand for management information. The act of returning goods that the shopping mall has already received to the supplier is prohibited because the consumer canceled the purchase.

In addition, the act of passing all installment fees to a supplier while carrying out an interest-free installment program is an unfair transfer of sales promotion expenses. Requesting manufacturer information from a supplier for the purpose of direct business with a manufacturer is a violation of the prohibition on the provision of management information.

If a shopping mall allows a supplier to use its own paid service, such as delivery, and the company refuses to do so, the act of lowering the ranking of the product from the search result is also a violation of the prohibition of providing disadvantages.

Among these guidelines, an exception to the prohibition of improper transfer of sales promotion costs will take effect from January 1, 2022.

An official from the FTC said, “This is a guideline for evaluating unfair trade practices by distribution industry, which is first established after the guidelines for judging illegality for TV home shopping. It is expected to improve the rationality of law enforcement through the criteria for judging illegality that reflects the characteristics of online transactions.”