Posted on : Nov.29,2017 16:43 KST
The e-commerce giant is under fire for pressuring advertising companies into exclusive contracts
After eBay Korea, a subsidiary of the US-owned company that runs e-commerce websites in the South Korean market such as Gmarket and Auction, asked advertising agencies not to make contracts with other companies, the Hankyoreh confirmed that South Korea’s Ministry of SMEs and Startups has submitted its opinion to the Free Trade Commission (FTC) that this practice is “problematic” and “needs investigation.”
“Since the advertising agencies are SMEs, we have listened to them to figure out what troubles they are facing. After determining that there are unfair practices and other problems, we informed the FTC of the relevant facts,” a Ministry official said on Nov. 28.
“After looking into the details, we determined that these were not unfair consignment and commission transactions, which would place them under the Ministry’s jurisdiction, and that they are subject to the Fair Trade Act. We shared our view with the FTC that it should decide whether the law has been broken and carry out an investigation or take additional measures,” the official added.
On the grounds of protecting secrets, eBay Korea forced its advertising agencies to sign contracts taking effect in January 2018 that ban them from doing business with other e-commerce websites (including 11 Street, Interpark, Coupang, Ticket Monster and We Make Price) for the duration of their contract with eBay Korea and for a year after that contract ends. If an agency is caught doing business with another e-commerce company, its contract with eBay Korea will terminate and it will be forced to pay a cancellation penalty as well as damages.
Online advertising agencies help numerous retailers that sell products on e-commerce websites advertise in various ways, such as writing their ad copy and providing them with exposure. The Free Trade Act bans companies from doing business on conditions that unfairly restrict their counterparts’ business activities and from obstructing the business activities of other companies. The advertising agencies have not reported eBay for engaging in unfair business practices.
“eBay is the undisputed leader in open e-commerce platforms, with more than a 60% share. Since advertising agencies have little leverage and have to keep doing business with eBay, they’re unlikely to report its behavior to the FTC,” said a source in the e-commerce industry.
When the FTC approved the merger of Gmarket and Auction in 2011, it announced that it would “continue to monitor the situation in the market and take strict measures if any behavior occurred that rivals were concerned was a violation of the Free Trade Act.” An FTC official told the Hankyoreh that the agency “cannot disclose whether or not it’s investigating a specific company.”
By Kim So-youn, staff reporter
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