Online lodging reservation platforms YeogiEottae and Yanolja, which unilaterally voided discount coupons sold to partner lodging businesses, have been brought to trial.
The Seoul Central District Prosecutors' Office Fair Trade Investigation Division (Director General Na Hee-seok) said on the 20th that it indicted the corporate entities of YeogiEottae and Yanolja without detention on charges of violating the Fair Trade Act. Shim Myung-seop, former CEO and founder of YeogiEottae, was also brought to trial on the same charge.
According to prosecutors, since 2017 the companies sold to lodging businesses ad products displayed on their apps bundled with discount coupons. At the time, lodging businesses had little choice but to buy the ad products sold by the two companies for their operations, and they also had to purchase the discount coupons tied in a so-called "bundling" format. Small and midsize lodging businesses account for 86% and 95% of listings on the two platforms, respectively.
The problem was that if these discount coupons were not used within the validity period, they were unilistically treated as expired. Yanolja wiped out all unused coupons when the one-month contract period ended, and YeogiEottae set the validity period of issued coupons to "one day," voiding any not used the same day.
Prosecutors determined that the amount of coupons that disappeared through this method totaled 35.9 billion won for YeogiEottae and 1.21 billion won for Yanolja. The value of the vanished coupons was said to have been reflected intact as profit for the two companies.
Prosecutors viewed this service method as disadvantaging partner businesses by exploiting a superior transactional position and, applying charges of violating the Fair Trade Act, indicted the two companies.
In addition, after designing this coupon policy at YeogiEottae and then selling the company to the U.K.-based private equity fund CVC Capital for about 300 billion won, reaping enormous gains, former CEO Shim was also brought to trial.
Earlier, the Korea Fair Trade Commission imposed penalty surcharges of 540 million won on Yanolja and 1 billion won on YeogiEottae. The two companies have filed administrative lawsuits in protest.
Prosecutors said, "This case is an act of abuse by an online platform against thousands of small and midsize merchants," and noted, "It is an example demonstrating that effective criminal sanctions for abuse of transactional position are essential to establish a fair market order." They added, "We will actively respond, in accordance with the law and principles, to various fair trade offenders who undermine the competitive order and disrupt the national economy."