- Sanctions on large corporations for encroaching on small businesses and neighborhood markets under the guise of coexistence -
- The largest ever case of labor support involving 221 people, spanning 12 years and 8 months, with a cost of 33.4 billion KRW -
The Korea Fair Trade Commission (hereinafter referred to as the "FTC") has decided to impose corrective orders and a fine of 24.5 billion KRW (provisional) on CJ Freshway Inc. (hereinafter referred to as "Freshway"), a subsidiary of the CJ Group, for dispatching 221 of its employees to 11 companies previously known as Fresh One (hereinafter referred to as "Fresh One") and covering labor costs amounting to 33.4 billion KRW on their behalf.
- Freshway: The number one domestic player in the food distribution industry (for large-scale food service companies, etc.), and a key subsidiary of CJ.
- Fresh One: Practically the number one player in the regional food distribution market (for small and medium-sized food service companies, etc.).
Around 2010, Freshway aimed to solidify its position in the food distribution market by swiftly dominating the regional food distribution market, which primarily served small and medium-sized businesses and where large corporations had not yet ventured, and by creating barriers to prevent other large competitors from entering the market.
At the time, small and medium-sized businesses, which accounted for an overwhelming majority (more than 85%) of the market, strongly opposed the entry of large corporations into the regional food distribution market, citing concerns about the infringement of neighborhood markets. To avoid conflicts with these small and medium-sized businesses, which were anticipated if it entered the market directly or independently, Freshway claimed to promote coexistence with them and entered the regional food distribution market by establishing Fresh One as a joint venture.
However, this approach was merely a pretext to avoid issues related to coexistence, and it is hard to see it as having a long-term or sustainable intent for coexistence with small and medium-sized businesses. The joint venture agreements allowed Freshway to acquire shares (51% or 66%) after the designated small and medium-sized businesses established Fresh One, effectively taking control of Fresh One. As a result of viewing small and medium-sized businesses as obstacles and business risks rather than partners for coexistence, even the CJ Group intervened to systematically and methodically oust these businesses (with Freshway eventually acquiring 100% of the shares).
While Freshway was internally working to systematically oust small and medium-sized businesses, Fresh One, leveraging the labor support in this case, was able to smoothly enter the market and secure a dominant position. This support continued until significant financial difficulties arose at Fresh One, delaying and preventing its exit from the market. As a result, Fresh One was able to maintain the sales network it had acquired from small and medium-sized businesses through the joint venture process.
Freshway dispatched a total of 221 personnel over 12 years and 8 months to Fresh One, with these personnel fully performing key managerial tasks such as corporate management at Fresh One, while Freshway covered the entire labor cost of 33.4 billion KRW.
Through this, Fresh One was able to secure experienced industry professionals from Freshway without any effort or cost from the start of its business, allowing it to artificially improve its competitive conditions and financial status beyond its inherent competitiveness. Moreover, Fresh One gained a dominant position in a market primarily composed of small and medium-sized businesses, and its exit from the market was artificially prevented, leading to the encroachment of the legitimate profits that should have been earned by small and medium-sized businesses by the large corporation.
This action is significant in that it identifies and sanctions an unprecedented scale of labor support used by a large corporation to enter a market with a significant number of small and medium-sized businesses under the guise of coexistence, only to later exclude them from the market and usurp their profits.
The FTC plans to continue monitoring unfair support practices by large corporations in markets with a significant presence of small and medium-sized businesses, and to take stern measures when legal violations are identified, thereby taking the lead in establishing fair trade practices.