'Inspection' Excuse for Delaying Payments Blocked... KFTC Revises Standard Contracts for Distribution Sector

Payment deadline start date explicitly defined as the "date of delivery"
Also blocks undisclosed logistics and advertising charges

Large retailers will be prohibited from delaying payments to suppliers under the pretext of inspecting goods or unilaterally passing on ancillary costs that were not agreed upon in advance.

The Korea Fair Trade Commission (KFTC) announced on November 13 that it had revised seven types of standard contracts for the distribution sector. The key change is to clarify the point from which the deadline for paying suppliers begins. Under current law, retailers must pay for goods within 60 days of receiving them in direct-purchase transactions. However, the previous contracts could be interpreted to mean that the goods were received only after inspection. The KFTC has therefore specified that the date of receipt is the “date of delivery,” regardless of inspection. It has also moved inspection-related provisions to follow the payment provisions in the contracts, closing off a loophole that allowed retailers to deliberately delay inspections and thereby put off payment.

The practice of unilaterally charging suppliers for logistics or advertising costs not specified in the contract will also be strictly restricted. The KFTC has significantly expanded the “obligation to give advance notice of other costs,” which previously applied only to some types of businesses, to cover six major types of direct-purchase and consignment transactions, including online shopping malls, department stores, large supermarkets and convenience stores. In addition, if retailers impose additional costs, they must notify suppliers at the time the contract is signed of the cost-sharing ratio and procedures for changing it, either in writing or through an electronic system that confirms transmission and receipt. Any costs that were not notified or discussed in advance may not be charged to suppliers, regardless of what they are called.

The KFTC said, “We plan to actively promote and recommend the use of these revised standard contracts to relevant industry stakeholders, including major business associations,” adding, “We will continue to improve the existing standard contracts for the distribution sector to reflect changes in the distribution market, industry needs and related institutional improvements.”

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