Department stores charge higher transaction fees to smaller vendors

Leading department stores in South Korea were found to have been charging small vendors more than 30 percent of their sales in transaction fees, the antitrust watchdog said Tuesday. According to the Fair Trade Commission (FTC), small and medium-sized vendors pay an average 31.8 percent of their sales in transaction fees to the top three department stores -- Lotte, Shinsegae and Hyundai. The result is based on an investigation into the contract terms of 73 vendors selling their products at those retail chains. They are mostly comprised of businesses that produce clothing and everyday goods. The findings were unveiled amid criticism that major department stores discriminate against small vendors by applying much higher commission fees or forcing them to pick up other expenses related to marketing and store interiors. Last week, the FTC said foreign luxury brands have been granted lower transaction fee rates, which can be as low as 15 percent. The watchdog has been at the forefront of an effort to crack down on unfair business practices in the retail sector, in line with a government push for "shared growth" between small and large businesses. FTC Chairman Kim Dong-soo recently said that his agency will launch a stepped-up investigation into the business terms between local department stores and their vendors as part of efforts to establish a fair trade environment in the retail sector. The FTC said that it will craft measures intended to help lower transaction fees in a way that could help smaller vendors, while at the same time continuing its investigation into any irregularities. It also promised to work hard to pass a bill that is intended to toughen the crackdown on large retailers that use their market dominance to force smaller vendors to accept unfair terms.