E-Mart fined for forcing stores to stay open overnight
E-Mart has been sanctioned by the country’s antitrust agency for forcing franchisees of its convenience store subsidiary, Emart24, to operate at night despite the stores losing money when doing so, according to the Fair Trade Commission (FTC), Wednesday.
The company was ordered to pay a fine of 145 million won ($110,000), marking the first time for the FTC to issue a franchise chain with a fine for the coercive practice.
The decision comes after an Emart24 franchisee in September 2020 requested a reduction of business hours after it experienced a business loss due to nighttime operations for three consecutive months. From June to August 2020, the store operated at a monthly loss of between 622,000 won and 700,000 won.
The franchisee said its sales during the night dropped after a nearby university changed its offline lessons to online due to COVID-19 and the store started seeing fewer customers from the campus.
Another franchisee made the same plea in November the same year. Its reason also derived from the pandemic shifts as fewer tourists, who had previously frequented the store’s vicinity, and the temporary shutdown of a nearby manufacturing plant drastically reduced the number of customers. From August to October 2020, it was operating at a monthly loss of between 1.1 million won and 1.3 million won.
The company declined their requests, insisting that they keep the stores open at night. The FTC, citing the country’s law on fair franchise transactions, said, however, that the franchisees met the conditions for reducing business hours.
Emart24 persisted in ignoring the franchisees even after its official filed a report that stated the franchisees’ businesses meet eligibility for what they requested. The company approved the requests only after the FTC commenced a field investigation in June 2021.
“The decision has demonstrated for the first time that for any chain operator to force 24-hour business operations on its franchisees violates the country’s fair franchise transaction law,” an FTC official said.