- Expanding Options for Delivery Types Expected to Reduce Supplier Fees -
The Korea Fair Trade Commission (hereinafter referred to as “KFTC”) has decided to initiate a consent decision procedure* on January 10, 2025, regarding Kakao’s alleged violations of the Fair Trade Act for Large-Scale Distribution Businesses.
*The “Consent Decision System” allows a company under investigation for alleged violations of the law to voluntarily propose corrective measures, such as compensation for damages and improvements in trade practices. If the KFTC finds the proposed measures reasonable after gathering opinions from stakeholders, it may conclude the case without confirming the illegality of the act. The process includes deciding whether to initiate the procedure → drafting a provisional consent decision → collecting opinions from stakeholders → deliberating and resolving on the final consent decision.
Background of the Investigation
Kakao has been under investigation for allegedly violating the Fair Trade Act for Large-Scale Distribution Businesses by requiring suppliers on its online shopping platform, “Kakao Gift,” to use only a free shipping method (including shipping costs), which combines shipping fees into the product price. The company then calculated sales commissions based on this total price, including shipping fees, and collected these commissions from suppliers.
Kakao’s Request for Consent Decision
Before receiving the KFTC’s examination report, Kakao voluntarily proposed corrective measures instead of disputing the legal judgment. This initiative aimed to improve trade practices in the online shopping market and foster mutual growth and cooperation with suppliers.
Key Points of the Proposal
- Expansion of Delivery Options
Suppliers will have greater flexibility to decide whether to include shipping costs in the product price, based on their business judgment. Previously, only the free shipping method (including shipping costs) was allowed, with sales commissions calculated on the total price. Under the new system, suppliers can choose paid shipping or conditional free shipping, where commissions are calculated solely on the product price. - Impact on Consumers
Even if suppliers switch from free shipping to paid shipping, consumers will not bear any additional costs. Products previously priced at KRW 10,000 (including shipping) will now display the product price (e.g., KRW 7,000) and shipping cost (e.g., KRW 3,000) separately, but consumers will continue to pay the same total amount (KRW 10,000). - Support Measures for Suppliers
To reduce supplier burdens and support their marketing efforts, Kakao plans to implement the following:- Fee Reductions: Lower electronic payment processing fees (PG fees), freeze consignment sales commissions, and exempt payment processing fees for shipping costs.
- Marketing Support: Provide discount marketing and reimburse discount amounts, offer free advertising credits, provide tailored consulting, and organize special sales events. Kakao intends to allocate at least KRW 9.2 billion for these efforts.
- Fair Trade Education and Compliance
Kakao will conduct fair trade training for its employees and executives involved in supplier-related work and introduce a voluntary Fair Trade Compliance Program (CP).
KFTC’s Decision
After considering factors such as the nature of the case, the potential benefits of Kakao’s corrective measures for trade practices and supplier protection, and the balance with the expected level of penalties, the KFTC decided to initiate the consent decision procedure.
The decision reflects the recent trend among suppliers preferring the free shipping method, the presence of multiple online business operators in the market, and the suppliers’ awareness of the delivery terms upon joining Kakao’s platform. It also recognizes that swiftly implementing Kakao’s proposed measures will benefit suppliers and align with public interests in improving trade practices.
Significance of the Decision
This marks the first application of the consent decision system to an online shopping platform since its introduction in July 2022 under the Fair Trade Act for Large-Scale Distribution Businesses. The decision aims to correct unfair practices in the online shopping market, enhance supplier rights, and improve trade practices without increasing consumer burdens.
The KFTC plans to collaborate with Kakao to finalize a provisional consent decision, gather opinions from stakeholders, consult with relevant agencies, and submit the final plan for review by the commission’s subcommittee as soon as possible.