Minimize the damages to vendors and customers

The malpractice will likely continue if financial authorities keep up their complacent administration.

A Seoul bankruptcy court froze the assets and debts of TMON and WeMakePrice — two e-commerce players under Singapore-based parent company Qoo10 — a day after the two filed for receivership amid deferred payment dues to vendors on their marketplace.

Under the receivership, creditors cannot exercise their debt claims through seizure or auction. The damage to vendors is evident. They won’t be able to receive payment until the court decides whether to save the two e-commerce companies — or they cannot expect to get their full payment back in the course of the court’s debt restructuring.

It is regrettable that TMON and WeMakePrice decided to turn to the court to resolve their financial crisis. Earlier, Qoo10 founder and CEO Ku Young-bae promised to settle the debacle by selling his own shares in the companies, but suddenly decided to file for bankruptcy to the surprise of vendors.

The government estimates that the unpaid bills by the two online platforms will reach 213.4 billion won ($154 million), but the figure can stretch to over 1 trillion won, as payments usually are settled 50 to 60 days after the transaction. At a parliamentary hearing on Tuesday, CEO Ku couldn’t nail down the exact number of his payment obligations. The Financial Supervisory Service (FSS) is tracing where the customers’ money had gone. FSS Governor Lee Bok-hyun likened the platform operators to “the shepherd boy who falsely cried wolf.” On the same day, President Yoon Suk Yeol defined the case as a scam. Authorities must get to the bottom of the case, find out what went wrong and hold related people accountable.

The government also cannot escape its liability. The marketplace players as well as their parent company have used customers’ money for purposes other than immediately repaying sellers as if they are a financial company. Nevertheless, they could avoid scrutiny by financial authorities. TMON and WeMakePrice entered a memorandum of understanding with the FSS in 2022 for relief in payments because of their accumulated losses. The Fair Trade Commission (FTC) also neglected a number of vendors’ repeated requests to shorten their online payment settlement period. The FCC left the matter unattended by demanding the trouble be settled between contract partners.

The antitrust agency must examine whether there is a need to revise the regulations after investigating if the two e-commerce platforms used their influence to force or bend settlement periods in their favor. The heads of the FTC and the FSS apologized for negligence and promised to upgrade trade regulations. The online blowouts all took place in regulatory blind spots. The malpractice will likely continue if financial authorities keep up their complacent administration.