Prosecutors Check ‘Gapjil’ Overlooked by Fair Trade Commission... Yeogi Eottae and Yanolja Indicted Without Detention (Comprehensive)

Slap on the Wrist After 5 Years: FTC Imposes Light Fines

SME Ministry and Prosecutors Step In, Overcoming Exclusive Right of Complaint Limits

Lee: "Unfair Power Dynamics in Korean Businesses Are Severe" – Strict Enforcement Stance

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The prosecution has indicted major domestic accommodation platforms Yanolja and Yeogiotte, as well as the founder and former CEO of Yeogiotte, identified as Mr. Shim, without detention on charges of abusing their superior position and engaging in unfair practices against partner businesses (violations of the Monopoly Regulation and Fair Trade Act and abuse of transactional superiority). Although the Fair Trade Commission's lukewarm response nearly allowed the misconduct of these platform companies to go unpunished, it is now being evaluated that mutual oversight by relevant agencies has resulted in proper accountability and effective criminal penalties.

'Slap on the wrist' after five years, intervention by the Ministry of SMEs and Startups and the prosecution... Lee: "Unfair hierarchical relationships in Korean companies are severe"

According to the Fair Trade Investigation Division at the Seoul Central District Prosecutors' Office (headed by Chief Prosecutor Na Heeseok) on the 20th, this case originally began with a report filed by the Korea Hotel Association in July 2020. However, after dragging on for more than five years, the Fair Trade Commission imposed relatively light penalties of KRW 1 billion on Yeogiotte and KRW 540 million on Yanolja, and did not pursue criminal charges. The companies involved are currently disputing even these penalty decisions through administrative litigation.

This case, which nearly ended with only fines, was overturned after the Ministry of SMEs and Startups and the prosecution intervened. Citing the seriousness of the case and significant damages to small business owners, the Ministry of SMEs and Startups exercised its right to request a prosecution from the Fair Trade Commission, opening the way for a prosecutorial investigation. The prosecution, after taking over the case, not only conducted a search and seizure of the companies, but also uncovered additional charges against Yeogiotte's founder, Mr. Shim, who personally designed and approved the problematic coupon expiration policy and then sold the company, earning an enormous profit of about KRW 300 billion. Accordingly, the prosecution also exercised its right to request prosecution against Mr. Shim personally, bringing him to trial.

This aligns with the current administration's policy of strictly punishing corporate abuse of power. Previously, on December 19 of last year, President Lee Jaemyung stated during a Fair Trade Commission work report that "Korean companies’ hierarchical unfairness is so severe that, in other countries, such behavior would result in a life sentence or even 100 years in prison." The prosecution explained, "Low-level fines have no deterrent effect on companies, and even if mechanically increased, the costs are ultimately passed on to consumers and minority shareholders."

Yonhap News Agency

KRW 37 billion pocketed by forcing 'one-day coupons'... Eventually, a win-win plan was announced

According to the investigation, the two companies, which account for 86% (Yeogiotte) and 95% (Yanolja) of the market share, sold discount coupons to partner motel operators and then arbitrarily invalidated unused remaining coupons. In particular, Yeogiotte inflicted about KRW 35.9 billion in damages by setting an extremely short coupon validity period of just one day, while Yanolja also arbitrarily expired coupons worth about KRW 1.21 billion.

However, as the prosecution's intensive investigation gained momentum, even the companies that had previously refused to back down in legal battles changed their stance. Yeogiotte committed to providing additional coupons with sufficient validity if the unused discount coupons exceeded 10% of the advertising fee paid by partner businesses. Yanolja also began a voluntary damage recovery process by issuing win-win coupons worth KRW 1.2 billion, equivalent to the amount of damages.

It is reported that the prosecution considered these voluntary compensation efforts as mitigating factors to some extent. Meanwhile, the Fair Trade Investigation Division at the Seoul Central District Prosecutors' Office has recently handled cases related to price fixing in sugar, flour, and starch sugar markets, as well as bid rigging involving Korea Electric Power Corporation, and cases of Fair Trade Act violations by Youngone Group, DB Group, and HDC. Going forward, the prosecution is expected to focus its investigative resources on collusion and abuse of power cases involving the four major oil refiners.

This content was produced with the assistance of AI translation services.