Fair Trade Commission levies fine on Gore-Tex fabric supplier

Posted on : 2017-08-28 17:18 KST Modified on : 2017-08-28 17:18 KST
FTC rules that Gore unlawfully restricted sales of Gore-Tex products at large retailers
A Gore-Tex climbing jacket
A Gore-Tex climbing jacket

Why is it that Gore-Tex hiking apparel has only been for sale at department stores and specialty retailers, but not at large retailers? That question has been answered with the Korean Fair Trade Commission’s crackdown on Gore, Gore-Tex’s fabric supplier.

On Aug. 27, the FTC, having found that Gore engaged in unfair trade practices by barring Gore-Tex from selling their apparel and shoes at large retailers, imposed a 3.67 billion won fine (about US $3.3 million) on the supplier for being in violation of laws against restrictive business practices. The relevant Fair Trade Act prohibits a company from unfairly imposing restrictions on its partner’s business activities. Gore is a functional fabrics market leader that supplies waterproof and windproof fabrics to the majority of the 29 outdoor brands in South Korea.

According to the FTC’s investigation, Gore implemented a policy from March 2009 to March 2012 that prohibited Gore-Tex from selling its products at large retailers, unilaterally imposing it on various other outdoor retailers as well. With Gore controlling around 60 percent of the functional fabric market, the policy had the effect of holding these companies captive. Companies that didn’t comply were ordered to recall the entirety of their stock, and in some cases, Gore withdrew contracts or halted the supply of fabric. Furthermore, Gore employees secretly visited large retailers in order to see whether the stores were selling Gore-Tex products.

The illegal policies were intended to prevent the price of Gore-Tex products from falling. The FTC explained that, “If Gore-Tex products were sold at large retailers, there would be a price drop effect from the competition with departments stores and specialty retailers.” In fact, the price of Gore-Tex products sold at large retailers from 2010 to 2012 was about half of that at department stores and specialty retailers.

The FTC stated that, “With Gore single-handedly controlling the outdoor companies’ distribution channels, they also undermined competition among these outdoor companies.”

The Fair Trade Commission went on to say, “The actions of Gore excessively restricted outdoor companies’ freedom to choose distribution channels, especially considering that doing business with large retailers was necessary...We expect that the normalized sale of Gore-Tex products will make buying clothing less burdensome for consumers.”

By Kwack Jung-soo, business correspondent

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