OB Beer forced all of its distributors to designate guarantors and was penalized by the Fair Trade Commission.
On the 12th, the Fair Trade Commission announced that it would impose corrective orders on OB Beer for abusing its transaction position to disadvantage distributors, a violation of the Distribution Industry Act, including prohibiting certain actions and modifying or deleting contract clauses.
Since February 2016 until recently, OB Beer required all distributors (452 in total) to apply a transaction contract that included the unconditional designation of guarantors. As a result, a total of 644 people served as guarantors. Among them, no maximum debt amount limit was specified for 622 guarantors of 436 distributors.
As a result, distributors had to bear excessive collateral, leading to difficulties in establishing and operating their businesses.
Of the 622 guarantors, 95% or 591 were found to be family members, such as spouses of employees affiliated with the distributors. There were even cases of families forging signatures due to the inability to secure guarantors.
OB Beer even required a total of 203 guarantors for 158 distributors, who could adequately manage the risks of uncollected claims.
The Fair Trade Commission determined that these actions unfairly used transaction authority to disadvantage the distributors. Considering that there were no actual instances where guarantors repaid debts, the level of penalties was decided based on the imposition of corrective orders.
An official from the Fair Trade Commission noted, 'This is a case of alleviating the excessive collateral burden placed on distributors and setting limits, thereby protecting their rights and improving the transaction practices of suppliers.'