Homeplus executives accused of selling customer data in KoreaOctober 2014
Former and current Korean ceos of Homeplus, Tesco’s Korean supermarket chain, have been banned from leaving the country over allegations that customers’ personal information collected during in-store promotions was sold to insurance companies. Prosecutors allege that the store’s top-management was involved in the sale of personal data.
A prosecutorial investigation team specializing in personal data leaks alleges the retailer collected data from 2.5 million people over the past five years through registration forms for competitions and sold it for about KRW 4,000 per person to multiple insurance companies.
Authorities say Homeplus may have netted KRW 10 billion from the sales.
The store’s labour union said the company incentivised cashiers to make customers register for lottery events, setting daily targets. They also gave awards to the branch that attracted the most entrants. “It’s really deplorable that Homeplus used us to cash in on an immoral business scam,” said a union representative in a statement.
There has been no suggestion that senior managers benefitted personally from the data sales. Rather, it seems that the project may have been designed to help plug a profit shortfall caused by poor sales.
Separately, two employees of Homeplus have been indicted on charges of rigging lottery results from promotional events so that a friend would win.
The two worked at the firm’s insurance service team. To rig the outcome of lotteries in their favour, they conspired with a subcontractor who conducted the lottery events. The fraud began 2012 and continued until June this year, netting the accused four cars worth KRW 150m.
Through Homeplus, Tesco serves over six million customers in South Korea every week across 400 stores and 198 franchise shops. Tesco launched Homeplus in South Korea in 1999. The business grew to become the second largest grocer in South Korea.
Homeplus became a hotbed of innovation, developing ‘virtual’ stores, which allow shoppers to buy items displayed on subway walls via their phones.
However, the business took a battering when new laws in 2011 restricted Sunday trading hours in a bid to support small retailers who complained they could not compete with large stores.
The change cost Homeplus around £40m annually in profits and cut sales.
Today, sales at the chain lag behind its two main rivals, E-Mart and Lotte Mart.
For the first half of this year, Homeplus posted a 4% decrease in sales in Korea.
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