Lip Service to Global Company
A sales team leader at Amore Pacific, which was strongly blamed for “acting like a superpower” by the public after an abusive language incident, was acquitted by the Fair Trade Commission last month.
A token 500 million won (US$476,320) fine was imposed on Amore Pacific for misappropriation of its business status, such as ignoring the wishes of the owners of retail stores and stealing door-to-door salesmen away from them by reassigning them to other stores. Civil organizations and victims of its actions are protesting this decision, since it seems to be nothing but a slap on the wrist for a large international company.
Strong Public Criticism
Last October, an audio recording was released in which a sales team leader at Amore Pacific could be heard shouting at a retail store owner to “renounce the operation of the retail store,” using abusive language. The content of the recording was shocking to the Korean public, as such words are not usually used in polite company.
Amore Pacific’s practice of extorting retail stores by threatening to ruin their retail business, which had been rumored about and denied by Amore Pacific, was also confirmed by the recording.
On the tape, the store owner asks, “What happens if I keep running the store?” The sales team leader answers with, “If you don’t cooperate, your products will stay unsold and we will open another retail store nearby.”
After this audio file was disclosed, the public raised strong criticism. As the situation deteriorated, the National Assembly summoned Son Young-chul, then-CEO of Amore Pacific, to a state administration inquiry in October last year. The National Assembly initially tried to bring out Seo Gyung-bae, chairman of Amore Pacific, as a witness, but this move was opposed by some assemblymen. CEO Son expressed his regret to the inquiry by saying, “All of these things happened because I taught my people wrong.”
The Chairman of the Fair Trade Commission, who attended the inquiry at that time, promised strict punishment of the unfair activities of Amore Pacific, and has investigated coercive actions about sales targets based on the Fair Trade Act, contract expirations, and the purchase of products. However, in the end, the Fair Trade Commission announced last month, “There was not enough evidence.” Only the 500 million won fine was imposed for the company being “partially responsible” for the reported activities.
Unfair Punishment Subject to Controversy
According to some analysts, the main reason for this so-called “abusive language crisis” is based on a history of loose punishments for big corporations. The Fair Trade Commission received many complaints about the unfair activities of Amore Pacific, such as splitting up retail stores, issuing fake tax invoices, over-managing employees, and cancelling special agencies, but there were no countermeasures whatsoever. A businessperson pointed out, “A slap on the wrist by the Fair Trade Commission in 2009 initiated this crisis.”
Businesspeople and professionals expected that corrective orders, fines, and prosecution would be levied against Amore Pacific, since this case was very similar to the Namyang crisis last year, the origin of “superpower weakness” controversies.
Considering that Namyang was prosecuted and imposed with 12.3 billion won (US$11.7 million) of fines, businesspeople and professionals anticipated that Amore Pacific, which has sales revenues more than double that of Namyang, would get over 20 billion won in fines.
An association of victimized retail location owners said, “Stocks of Amore Pacific have recently become golden stocks, and the company has become a global cosmetics company. All of this was possible because of unfair commercial activities such as squeezing retail stores and stealing sales employees away. If the government keeps overlooking immoral companies, there will be a second and third Amore Pacific crisis.”
On the other hand, Amore Pacific, the permanent number one in the Korean cosmetics market, was ranked 17th place among the world’s 100 cosmetics companies last year according to WWB Beauty, a global magazine specializing in fashion.
Amore Pacific recently announced its group vision of being a “Great Global Brand Company” under the banner of “Asian Beauty Creator.” Through this goal, the company plans to increase its export portion from the current 20 to 50 percent by 2020.