Ethical Performance
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South Korea tries to clean up home shopping industry

March 2015

South Korea’s home shopping industry is moving to clean up its act under the threat of a punitive government crackdown.

The move follows a warning by three government bodies — the Fair Trade Commission; the Ministry of Science, ICT and Future Planning; and the Small and Medium Business Administration — that they will crack down on the industry’s corrupt ways by including fair trade issues into license reviews.

The crackdown comes after a series of scandals.

Last year, Lotte Home Shopping was at the centre of a corruption controversy and was investigated by prosecutors.
The firm’s former ceo was prosecuted for receiving a KRW 100 million bribe from a supplier and embezzling about KRW 300 million of the company’s funds.

He was convicted at the end of last year, receiving a jail term of two years and a fine of almost KRW 90 million.

Lotte Home Shopping is part of the Lotte Group, South Korea’s largest retailer.

Six major home shopping networks face punishment following an investigation last year by the fair trade regulator for what a senior official described as perpetrating “the complete gamut of unfair business activities.”

The companies are GS Home Shopping, CJ O Shopping, Hyundai Home Shopping, Lotte Home Shopping, NS Home Shopping and Home & Shopping.

The six will be the first to be punished under a new law introduced in 2012 to punish unfair business activities by large retailers. Penalties are still to be announced.

In a move to reform, Lotte Home Shopping has recently announced that it will start providing additional monthly entertainment allowances of up to KRW 400,000 a month to employees who deal directly with product suppliers.

Lotte hope to prevent suppliers offering their employees any kind of hospitality or inducement that might lead to corrupt deals.

Home shopping channels usually make their suppliers pay for all sort of things to get their products on air.

They have justified their ways by saying it was “a customary practice.”

According to a Lotte spokesperson, Lotte Home Shopping is trying to clean up the company’s image of being a corrupt organisation.

Lotte is not alone in such an initiative.

Two more home shopping channels are waiting for assessments to get re-licensed. The two, Hyundai Home Shopping and NS Home Shopping, say they have expanded investments in social corporate responsibility hoping to reduce the endemic malpractices in their operations. 

Asia | Corruption

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