GM distributor $208K fined for coercing sellers on marketing costs

Seoul, June 18

South Korea's antitrust regulator said on Sunday it has decided to slap a fine of 265 million won ($208,000) on General Motor's Asian distributor and correct its unfair business practice of forcing its dealers to share the burden of marketing costs.

The punitive measure came after GM Asia Pacific Regional Headquarters Ltd., a wholly-owned subsidiary of US-based General Motors, rolled out promotional campaigns from 2016 to 2018 in South Korea without the agreement of retailers, the Fair Trade Commission (FTC) said.

According to the regulator, GM Asia Pacific Regional Headquarters, the distributor of Cadillac models in South Korea, compelled dealers to bear a portion of marketing expenses exceeding 5 per cent of a vehicle's cost, reports Yonhap news agency.

Over the period, the sellers had to pay around 482 million won for discounts on the automobiles sold.

"GM Asia Pacific Regional Headquarters desperately needed to roll out monthly promotional events to expand their low market share and ease the cost burdens of managing inventories," the regulator said.

Cadillac models took up around 0.8 per cent of the domestic imported car market in 2018, far below other rivals. The models accounted for 0.55 per cent in 2020.

"In order to overcome the situation, despite the request from retailers to avoid launching promotional events, the company unilaterally imposed discount cost burdens on retailers without consultation," it added.

This marked the FTC's inaugural punitive action against an imported car distributor for coercing retailers to participate in cost-sharing for marketing expenses.