Even 9-Year-Old Products Labeled as "New"… NH Hanaro Distribution Fined 460 Million Won for Supplier Exploitation

Unfair Gains through Changing the "Listing Standard"

Sanctions Also Imposed for Delayed Contract Issuance and Deployment of Promotional Staff without Agreements

NH Hanaro Distribution Co., Ltd. has been sanctioned by the Fair Trade Commission for collecting hundreds of millions of won in slotting allowances by labeling as "new products" items that had been on the market for nearly nine years, simply because they were newly registered in their own stores. As of last year, NH Hanaro Distribution recorded sales of 1.1804 trillion won, ranking it sixth among the country’s major hypermarket operators.

Is the Hanaro Mart listing date the standard for a new product? ... Ignoring industry norms to collect 300 million won

On August 9, the Fair Trade Commission announced that it had ordered corrective measures and imposed a total fine of 462 million won on NH Hanaro Distribution, citing multiple violations of the Large-scale Retail Business Act, including delayed issuance of written contracts and dispatching promotional staff without contracts.

According to the Fair Trade Commission, in January 2021, NH Hanaro Distribution revised its internal "Sales Incentive Work Processing Manual," changing the definition of a new product from "actual market release date" to "the point of registration at its own business premises (Hanaro Mart)," regardless of when the product was first sold in the market. Afterward, the company applied a rule that allowed it to collect 10% of the supplied amount during the six months after listing as a "new product slotting incentive."

Under current Fair Trade Commission review guidelines and distribution industry practice, a new product is restricted to "products released on the market within the past six months." This is a measure designed to prevent retailers from demanding economic benefits from suppliers without legitimate grounds.

However, after amending its manual, from February to November 2021, NH Hanaro Distribution unfairly collected a total of 323.6 million won in slotting allowances from 43 suppliers for 187 products that had been on the market for well over six months. Among the cases discovered was a product that had been on the market for as long as 8 years and 9 months (105 months), prompting criticism that this is a typical example of abuse of superior bargaining power by a large distributor.

Widespread unfair practices detected, including delayed contract submission and unauthorized use of promotional staff

The unfair practices by NH Hanaro Distribution did not stop there. Chronic violations of distribution law were also uncovered, such as failing to promptly issue written contracts and receiving promotional staff supplied by vendors without advanced agreements.

Between January 2021 and July 2024, a total of 863 contracts were signed with 426 suppliers and sellers, but the company failed to provide the written contract immediately. There were 710 cases in which NH Hanaro Distribution delayed signing, 153 cases where written documents were not sent in a timely manner, and the average delay reached 30 days. In 64 cases, delays lasted over 100 days.

In addition, from April 2021 to January 2024, the company received 43 promotional staff from 10 suppliers and deployed them in stores without first concluding a written agreement on dispatch conditions. Some promotional staff worked without a contract for periods ranging from at least one day to as long as 365 days, and wage expenses borne by the suppliers exceeded 108 million won.

The Fair Trade Commission stated that the significance of this action is that it clearly establishes that collecting unreasonable sales incentives based on internal listing standards by large distributors is illegal. Going forward, the Commission will continue to monitor entrenched unfair practices in the retail market, such as failure to provide written contracts and unauthorized use of promotional staff, to protect the rights and interests of suppliers.

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