South Korean convenience-store operator BGF Retail has been fined for pushing exorbitant sales promotion costs onto its suppliers.
The firm was ordered to pay KRW1.67 billion (US$1.4 million) for its breach of the Act on Fair Transactions in Large Retail Business, according to a report in The Korea Times.
While the act forbids any retailer from forcing its supplier to shoulder more than half of any promotional cost, BGF was found to have run “two-for-one” promotional events from early 2014 to late 2016 at its CU-branded stores and passed on the majority of expenses.
The firm pushed KRW2.39 billion ($2 million) in costs on 79 suppliers to pay for 338 promotions conducted during the period at more than 13,000 CU locations. It also failed to sign written agreements with suppliers prior to holding sales events in 76 cases.
“This is the first time that the FTC has punished a company for forcing suppliers to shoulder more than 50 percent of the cost for two-for-one events,” said an official at Korea’s Fair Trade Commission. “The FTC will enhance monitoring and punishments for similar violations.”
CU is currently in second place among Korea’s leading convenience store chains, with a 31.14 per cent market share.